<PAGE> 1
THE WM GROUP OF FUNDS
Prospectus
MARCH 1, 1999, AS REVISED MAY 19, 1999
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Money Funds
+ Money Market Fund
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+ Tax-Exempt Money Market Fund
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+ California Money Fund
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Fixed-Income Funds
+ Short Term High Quality Bond Fund
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+ Target Maturity 2002 Fund
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+ U.S. Government Securities Fund
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+ Income Fund
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+ High Yield Fund
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Municipal Funds
+ Tax-Exempt Bond Fund
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+ California Municipal Fund
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+ California Insured Intermediate Municipal Fund
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+ Florida Insured Municipal Fund
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Equity Funds
+ Bond & Stock Fund
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+ Growth & Income Fund
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+ Northwest Fund
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+ Growth Fund
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+ Emerging Growth Fund
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+ International Growth Fund
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WM Strategic Asset Management Portfolios
+ Strategic Growth Portfolio
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+ Conservative Growth Portfolio
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+ Balanced Portfolio
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+ Flexible Income Portfolio
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+ Income Portfolio
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The WM Group of Funds provides a broad selection
of investment alternatives to investors.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a crime.
<PAGE> 2
THE WM GROUP OF FUNDS
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CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Risk/Return Summary 2
Summary of Principal Risks 26
Fees and Expenses of the Funds and Portfolios 31
Description of the Funds and Portfolios 35
Money Funds 35
Fixed-Income Funds 36
Municipal Funds 38
Equity Funds 40
Strategic Asset Management Portfolios 41
Common Investment Practices 42
Ways to Set Up Your Account 51
How Can I Invest in the Funds and Portfolios? 52
Which Class of Shares is Best for Me? 54
Class A Shares 54
Class B Shares 55
Distribution Plans 57
Distribution of Income and Capital Gains 57
How Can I Sell Shares? 57
How Can I Exchange My Shares? 58
Dividends, Capital Gains and Taxes 59
Organization 60
Financial Highlights 64
</TABLE>
<PAGE> 3
RISK/RETURN SUMMARY
The WM Group of Funds provides a broad range of investment choices, including
asset allocation strategies available through the WM Strategic Asset Management
Portfolios (the "Portfolios"). This summary identifies the investment objective,
principal investment strategies and principal risks of each Fund and Portfolio.
The principal investment strategies identified in this summary are not the only
investment strategies available to the Funds and Portfolios, and some of the
principal investment strategies may not be available at any given time. For a
discussion of all of the investment strategies available to the Funds and
Portfolios, please see the Statement of Additional Information (the "SAI").
The principal investment strategies identified in this summary provide specific
information about each of the Funds and Portfolios, but there are some general
principles WM Advisors and the sub-advisors apply in making investment
decisions. Generally, when making decisions about whether to buy or sell equity
securities, WM Advisors and the sub-advisors will consider, among other things,
a company's strength in fundamentals, its potential for earnings growth over
time, and the current price of its securities relative to their perceived worth.
When making decisions about whether to buy or sell fixed-income investments, WM
Advisors and the sub-advisors will generally consider, among other things, the
strength of certain sectors of the fixed-income market relative to others,
interest rates and other general market conditions, as well as the credit
quality of individual issuers.
The discussion of each Fund's and Portfolio's principal investment strategies
includes a short discussion of some of the principal risks of investing in such
Fund or Portfolio. You can find additional information about each Fund and
Portfolio, including a more detailed description of these and other principal
risks of an investment in each Fund or Portfolio, after this summary.
Investments mentioned in the summary and described in greater detail under
"Common Investment Practices" below appear in BOLD TYPE. Please be sure to read
the more complete descriptions of the Funds and Portfolios, and the related
risks, before you invest.
Below the description of each Fund or Portfolio is a bar chart showing how the
investment returns of its Class A shares have varied in the past ten years, or
in the years since the Fund or Portfolio began if it is less than ten years old.
The bar chart is intended to provide some indication of the volatility of the
Fund's or Portfolio's returns. The table following each bar chart shows how, for
each Class of shares, average annual returns of the Fund or Portfolio compare to
returns of a broad-based securities market index for the last one, five and ten
years (or, for a newer Fund or Portfolio, for the life of the Fund or
Portfolio). Performance shown in the table reflects the maximum applicable sales
charge, but performance shown in the bar chart does not reflect any sales
charges. PAST PERFORMANCE IS NOT NECESSARILY AN INDICATION OF FUTURE
PERFORMANCE.
There can be no assurance that any Fund or Portfolio will achieve its objective.
It is possible to lose money on investments in the Funds and Portfolios. An
investment in a Fund or Portfolio is not a deposit of a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the Money Funds seek to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing in the
Money Funds.
2
<PAGE> 4
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MONEY MARKET fund
OBJECTIVE This Fund seeks to maximize current income while preserving capital
and maintaining liquidity.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS The Fund invests in high-quality
money market instruments. The Fund's investments in high-quality money market
instruments may include U.S. GOVERNMENT SECURITIES, FLOATING AND VARIABLE RATE
SECURITIES, MUNICIPAL OBLIGATIONS, U.S. dollar denominated FOREIGN INVESTMENTS,
ASSET-BACKED SECURITIES, REPURCHASE AGREEMENTS, and WHEN-ISSUED AND DELAYED-
DELIVERY SECURITIES.
<TABLE>
Among the principal risks of investing in the Fund are:
<S> <C>
- - Market Risk, - Liquidity Risk,
- - Credit Risk, - Management Risk, and
- - Foreign Investment - Money Market Risk.
Risk,
</TABLE>
YEARLY performance of Class A Shares*
[Money Market Bar Chart]
<TABLE>
<CAPTION>
ANNUAL RETURN (%)
-----------------
<S> <C>
'1989' 8.57
'1990' 7.58
'1991' 5.39
'1992' 3.06
'1993' 2.41
'1994' 3.47
'1995' 5.33
'1996' 4.87
'1997' 5.04
'1998' 5.00
</TABLE>
Calendar Year
During the periods shown above, the highest quarterly return was 2.22% (for the
quarter ended 6/30/89), and the lowest was 0.56% (for the quarter ended
6/30/93).
PERFORMANCE TABLE*
<TABLE>
<CAPTION>
Average Annual Total Returns Past Past Past Since Class B
(for periods ended December 31, 1998) One Year Five Years Ten Years Inception (5/2/94)
<S> <C> <C> <C> <C>
CLASS A SHARES 5.00% 4.74% 5.06% N/A
CLASS B SHARES 4.19% N/A N/A 3.87%
MERRILL LYNCH 3-MONTH U.S. TREASURY BILL INDEX** 5.23% 5.21% 5.68% 5.37%
</TABLE>
* The Fund's performance through December 31, 1997 benefitted from the
agreement of WM Advisors and its affiliates to limit the Fund's expenses.
Class B share average annual total returns shown in the table reflect the
maximum applicable contingent deferred sales charge.
** This is an unmanaged index that measures the performance of 3-month U.S.
Treasury bills currently available in the marketplace.
3
<PAGE> 5
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TAX-EXEMPT MONEY MARKET fund
OBJECTIVE This Fund seeks to maximize current income that is exempt from
federal income tax while preserving capital and maintaining liquidity.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS The Fund invests primarily in
high-quality, short-term, fixed-income MUNICIPAL OBLIGATIONS issued by states,
counties, cities or other governmental entities that generate income exempt from
federal income tax. The Fund's investments may include VARIABLE RATE
OBLIGATIONS, HOLDINGS IN OTHER INVESTMENT COMPANIES, MUNICIPAL LEASES,
WHEN-ISSUED and DELAYED-DELIVERY SECURITIES and ALTERNATIVE MINIMUM TAX ("AMT")-
SUBJECT BONDS.
Among the principal risks of investing in the Fund are:
<TABLE>
<S> <C>
- - Market Risk, - Management Risk,
- - Credit Risk, - Tax Risk, and
- - Liquidity Risk, - Money Market Risk.
</TABLE>
YEARLY performance of Class A Shares*
[Tax-Exempt Money Market Bar Chart]
<TABLE>
<CAPTION>
ANNUAL RETURN (%)
-----------------
<S> <C>
1989 6.04
1990 5.76
1991 4.18
1992 2.41
1993 2.06
1994 2.37
1995 4.00
1996 3.05
1997 3.18
1998 3.07
</TABLE>
Calendar Year
During the periods shown above, the highest quarterly return was 1.63% (for the
quarter ended 6/30/89), and the lowest was 0.46% (for the quarter ended
3/31/94).
PERFORMANCE TABLE*
<TABLE>
<CAPTION>
Average Annual Total Returns Past Past Past Since Class B
(for periods ended December 31, 1998) One Year Five Years Ten Years Inception (5/2/94)
<S> <C> <C> <C> <C>
CLASS A SHARES 3.07% 3.13% 3.60% N/A
CLASS B SHARES 2.08% N/A N/A 2.18%
MERRILL LYNCH 3-MONTH U.S. TREASURY BILL INDEX** 5.23% 5.21% 5.68% 5.37%
</TABLE>
* The Fund's performance through December 31, 1998 has benefitted from the
agreement of WM Advisors and its affiliates to limit the Fund's expenses.
Class B share average annual total returns shown in the table reflect the
maximum applicable contingent deferred sales charge.
** This is an unmanaged index that measures the performance of 3-month U.S.
Treasury bills currently available in the marketplace.
4
<PAGE> 6
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CALIFORNIA MONEY fund
OBJECTIVE This Fund seeks to maximize current income that is exempt from
federal and California state personal income tax, consistent with safety of
principal and maintenance of liquidity.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS The Fund invests primarily in
high-quality, short-term, fixed-income MUNICIPAL OBLIGATIONS issued by states,
counties, cities or other governmental bodies that generate income exempt from
California state personal income tax. The Fund may also invest in high-quality
instruments that may generate taxable income, including U.S. GOVERNMENT
SECURITIES, MORTGAGE- AND ASSET-BACKED SECURITIES (including collateralized
mortgage obligations) and REPURCHASE AGREEMENTS.
Among the principal risks of investing in the Fund are:
<TABLE>
<S> <C>
- - Market Risk, - Liquidity Risk,
- - Credit Risk, - Management Risk,
- - Geographic - Tax Risk, and
Concentration Risk, - Money Market Risk.
</TABLE>
The Fund is also "non-diversified," which means that the Fund may invest more of
its assets in the securities of fewer issuers than other mutual funds. Thus, the
Fund is also subject to Non-Diversification Risk.
YEARLY performance of Class A Shares*
[California Money Bar Chart]
<TABLE>
<CAPTION>
ANNUAL RETURN (%)
-----------------
<S> <C>
1990 5.02
1991 3.85
1992 2.60
1993 1.85
1994 2.20
1995 3.11
1996 2.76
1997 2.85
1998 2.48
</TABLE>
Calendar Year
During the periods shown above, the highest quarterly return was 1.34% (for the
quarter ended 12/31/89), and the lowest was 0.43% (for the quarter ended
3/31/94).
PERFORMANCE TABLE*
<TABLE>
<CAPTION>
Average Annual Total Returns Past Past Since Class A Since Class B
(for periods ended December 31, 1998) One Year Five Years Inception (7/10/89) Inception (6/30/94)
<S> <C> <C> <C> <C>
CLASS A SHARES 2.48% 2.68% 3.09% N/A
CLASS B SHARES 1.65% N/A N/A 2.00%
MERRILL LYNCH 3-MONTH U.S. TREASURY
BILL INDEX** 5.23% 5.21% 5.49% 5.40%
</TABLE>
* The Fund's performance through December 31, 1998 has benefitted from the
agreement of WM Advisors and its affiliates to limit the Fund's expenses.
Class B share average annual total returns shown in the table reflect the
maximum applicable contingent deferred sales charge.
** This is an unmanaged index that measures the performance of 3-month U.S.
Treasury bills currently available in the marketplace.
5
<PAGE> 7
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SHORT TERM HIGH QUALITY BOND fund
OBJECTIVE This Fund seeks as high a level of current income as is consistent
with prudent investment management and stability of principal.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS The Fund invests primarily in
high-quality short-term bonds and other FIXED-INCOME SECURITIES. The Fund
generally maintains a dollar-weighted average portfolio maturity of three years
or less. The Fund's investments may include corporate securities, U.S.
GOVERNMENT SECURITIES, REPURCHASE AGREEMENTS AND MORTGAGE- AND ASSET-BACKED
SECURITIES.
Among the principal risks of investing in the Fund are:
<TABLE>
<S> <C>
- - Market Risk, - Leveraging Risk,
- - Credit Risk, - Derivatives Risk,
- - Currency Risk, - Liquidity Risk, and
- - Foreign - Management Risk.
Investment Risk,
</TABLE>
YEARLY performance of Class A Shares*
[Yearly Performance Chart]
<TABLE>
<CAPTION>
ANNUAL RETURN (%)
-----------------
<S> <C>
1994 -2.05
1995 10.03
1996 4.09
1997 5.77
1998 6.30
</TABLE>
Calendar Year
During the periods shown above, the highest quarterly return was 3.28% (for the
quarter ended 6/30/95), and the lowest was -1.52% (for the quarter ended
12/31/94).
PERFORMANCE TABLE*
<TABLE>
<CAPTION>
Average Annual Total Returns Past Past Since Class A Since Class B
(for periods ended December 31, 1998) One Year Five Years Inception (11/1/93) Inception (6/30/94)
<S> <C> <C> <C> <C>
CLASS A SHARES 2.75% 4.00% 3.98% N/A
CLASS B SHARES 1.51% N/A N/A 4.79%
LEHMAN BROTHERS MUTUAL FUND SHORT (1-5)
INVESTMENT GRADE DEBT INDEX** 7.56% 6.70% 6.36% 7.78%
</TABLE>
* Performance shown in the bar chart does not reflect any sales charge, while
the average annual total returns shown in the table reflect the maximum
applicable initial or contingent deferred sales charge. The Fund's
performance through December 31, 1998 has benefitted from the agreement of WM
Advisors and its affiliates to limit the Fund's expenses.
** This index includes all investment-grade, corporate debt securities with
maturities of one to five years.
6
<PAGE> 8
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TARGET MATURITY 2002 fund
OBJECTIVE This Fund seeks as high a level of return as is consistent with
preservation of capital through December 31, 2002, and current income consistent
with the creditworthiness of U.S. Treasury securities thereafter.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS The Fund invests primarily in
ZERO-COUPON U.S. Treasury Securities that will mature during 2002. The Fund may
also invest in other U.S. GOVERNMENT SECURITIES and FIXED-INCOME SECURITIES.
Among the principal risks of investing in the Fund are:
<TABLE>
<S> <C>
- - Market Risk, - Derivatives Risk,
- - Credit Risk, - Liquidity Risk, and
- - Leveraging Risk, - Management Risk.
</TABLE>
YEARLY performance of Class A Shares*
[Yearly Performance Chart]
<TABLE>
<CAPTION>
ANNUAL RETURN (%)
-----------------
<S> <C>
1996 0.44
1997 8.27
1998 10.06
</TABLE>
Calendar Year
During the periods shown above, the highest quarterly return was 7.91% (for the
quarter ended 6/30/95), and the lowest was -8.47% (for the quarter ended
9/30/98).
PERFORMANCE TABLE*
<TABLE>
<CAPTION>
Average Annual Total Returns Past Life of Fund
(for periods ended December 31, 1998) One Year (Since 3/20/95)
<S> <C> <C>
CLASS A SHARES 7.90% 8.42%
LEHMAN BROTHERS GOVERNMENT BOND INDEX** 9.85% 9.35%
</TABLE>
* Performance shown in the bar chart does not reflect any sales charge, while
the average annual total returns shown in the table reflect the maximum
initial sales charge. The Fund's performance through December 31, 1998 has
benefitted from the agreement of WM Advisors and its affiliates to limit the
Fund's expenses.
** This index includes all U.S. Government agency and Treasury securities.
7
<PAGE> 9
- --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES fund
OBJECTIVE This Fund seeks a high level of current income consistent with safety
and liquidity.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS The Fund invests primarily in U.S.
GOVERNMENT SECURITIES, including collateralized mortgage obligations and other
MORTGAGE-BACKED SECURITIES. The Fund may also invest in DOLLAR ROLLS, which
involve leverage.
Among the principal risks of investing in the Fund are:
<TABLE>
<S> <C>
- - Market Risk, - Derivatives Risk,
- - Credit Risk, - Liquidity Risk, and
- - Leveraging Risk, - Management Risk.
</TABLE>
YEARLY performance of Class A Shares*
[Yearly Performance Chart]
<TABLE>
<CAPTION>
ANNUAL RETURN (%)
-----------------
<S> <C>
1989 13.30
1990 9.45
1991 14.72
1992 6.12
1993 8.12
1994 -4.91
1995 19.45
1996 2.48
1997 9.92
1998 7.21
</TABLE>
Calendar Year
During the periods shown above, the highest quarterly return was 7.65% (for the
quarter ended 6/30/89), and the lowest was -3.68% (for the quarter ended
3/31/94).
PERFORMANCE TABLE*
<TABLE>
<CAPTION>
Average Annual Total Returns Past Past Past Since Class B
(for periods ended December 31, 1998) One Year Five Years Ten Years Inception (3/31/94)
<S> <C> <C> <C> <C>
CLASS A SHARES 2.39% 5.55% 7.89% N/A
CLASS B SHARES 6.23% N/A N/A 6.65%
LEHMAN BROTHERS GOVERNMENT BOND INDEX** 9.85% 7.18% 9.17% 8.27%
</TABLE>
* Performance shown in the bar chart does not reflect any sales charge, while
the average annual total returns shown in the table reflect the maximum
applicable initial or contingent deferred sales charge. The Fund's
performance through December 31, 1998 has benefitted from the agreement of WM
Advisors and its affiliates to limit the Fund's expenses.
** This index includes all U.S. Government agency and Treasury securities.
8
<PAGE> 10
- --------------------------------------------------------------------------------
INCOME fund
OBJECTIVE This Fund seeks a high level of current income consistent with
preservation of capital.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS The Fund invests primarily in a
diversified pool of FIXED-INCOME SECURITIES, including corporate securities,
U.S. GOVERNMENT SECURITIES and MORTGAGE-BACKED SECURITIES (including
collateralized mortgage obligations), up to 35% of which may be in LOWER-RATED
SECURITIES (which are sometimes called "junk bonds"). The Fund may also invest
in convertible securities.
Among the principal risks of investing in the Fund are:
- - Market Risk, - Leveraging Risk,
- - Credit Risk, - Derivatives Risk,
- - Currency Risk, - Liquidity Risk, and
- - Foreign Investment Risk, - Management Risk.
YEARLY performance of Class A Shares*
[Income Fund Bar Chart]
<TABLE>
<CAPTION>
ANNUAL RETURN (%)
-----------------
<S> <C>
1989 6.75
1990 8.21
1991 17.29
1992 7.38
1993 10.82
1994 -4.82
1995 21.58
1996 3.46
1997 10.51
1998 7.15
</TABLE>
Calendar Year
During the periods shown above, the highest quarterly return was 8.04% (for the
quarter ended 6/30/95), and the lowest was -3.95% (for the quarter ended
3/31/94).
PERFORMANCE TABLE*
<TABLE>
<CAPTION>
Average Annual Total Returns Past Past Past Since Class B
(for periods ended December 31, 1998) One Year Five Years Ten Years Inception (3/30/94)
<S> <C> <C> <C> <C>
CLASS A SHARES 2.30% 6.25% 8.12% N/A
CLASS B SHARES 1.31% N/A N/A 7.45%
LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX* 9.47% 7.30% 9.34% 8.43%
</TABLE>
* Performance shown in the bar chart does not reflect any sales charge, while
the average annual total returns shown in the table reflect the maximum
applicable initial or contingent deferred sales charge.
** This index is generally considered representative of the U.S. government and
corporate bond markets.
9
<PAGE> 11
- --------------------------------------------------------------------------------
HIGH YIELD fund
OBJECTIVE This Fund seeks to provide a high level of current income.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS The Fund invests primarily in
high-yielding LOWER-RATED SECURITIES (sometimes called "junk bonds"), which may
include FOREIGN INVESTMENTS. The Fund may also invest in higher-rated
FIXED-INCOME SECURITIES, preferred stock and convertible securities.
Among the principal risks of investing in the Fund are:
- - Market Risk, - Leveraging Risk,
- - Credit Risk, - Derivatives Risk,
- - Currency Risk, - Liquidity Risk,
- - Foreign Investment Risk, - Management Risk, and
- Smaller Company Risk.
NO PERFORMANCE INFORMATION IS AVAILABLE FOR THE HIGH YIELD FUND BECAUSE IT HAS
NOT YET BEEN IN OPERATION FOR A FULL YEAR.
10
<PAGE> 12
- --------------------------------------------------------------------------------
TAX-EXEMPT BOND fund
OBJECTIVE This Fund seeks to provide a high level of income that is exempt from
federal income tax while protecting investors' capital.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS The Fund invests primarily in
MUNICIPAL OBLIGATIONS issued by states, counties, cities or other governmental
entities, including MUNICIPAL LEASES, AMT-SUBJECT BONDS and INVERSE FLOATING
RATE OBLIGATIONS, that generate income exempt from federal income tax. The Fund
may also invest in taxable FIXED-INCOME SECURITIES (including junk bonds) and
utilize STRATEGIC TRANSACTIONS (derivatives) such as interest rate futures and
options.
Among the principal risks of investing in the Fund are:
<TABLE>
<S> <C>
- - Market Risk, - Liquidity Risk,
- - Credit Risk, - Management Risk, and
- - Leveraging Risk, - Tax Risk.
- - Derivatives Risk,
</TABLE>
YEARLY performance of Class A Shares*
[Yearly Performance Graph]
<TABLE>
<CAPTION>
ANNUAL RETURN (%)
-----------------
<S> <C>
1989 8.08
1990 6.71
1991 11.36
1992 9.00
1993 12.54
1994 -6.53
1995 18.25
1996 2.52
1997 8.59
1998 5.08
</TABLE>
Calendar Year
During the periods shown above, the highest quarterly return was 7.29% (for the
quarter ended 3/31/95), and the lowest was -6.33% (for the quarter ended
3/31/94).
PERFORMANCE TABLE*
<TABLE>
<CAPTION>
Average Annual Total Returns Past Past Past Since Class B
(for periods ended December 31, 1998) One Year Five Years Ten Years Inception (3/30/94)
<S> <C> <C> <C> <C>
CLASS A SHARES 0.36% 4.30% 6.88% N/A
CLASS B SHARES -0.77% N/A N/A 5.82%
LEHMAN BROTHERS MUNICIPAL BOND INDEX** 6.47% 6.22% 8.22% 7.83%
</TABLE>
* Performance shown in the bar chart does not reflect any sales charge, while
the average annual total returns shown in the table reflect the maximum
applicable initial or deferred contingent sales charge.
** This index includes all investment grade, tax-exempt bond issues.
11
<PAGE> 13
- --------------------------------------------------------------------------------
CALIFORNIA MUNICIPAL fund
OBJECTIVE This Fund seeks to provide as high a level of current income that is
exempt from federal and California state income tax as is consistent with
prudent investment management and preservation of capital.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS The Fund invests primarily in
intermediate-and long-term California MUNICIPAL OBLIGATIONS, including municipal
leases and AMT-SUBJECT BONDS. The Fund may also invest in other municipal
obligations and utilize STRATEGIC TRANSACTIONS (derivatives) such as interest
rate futures and options.
Among the principal risks of investing in the Fund are:
- - Market Risk, - Derivatives Risk,
- - Credit Risk, - Liquidity Risk,
- - Leveraging Risk, - Management Risk, and
- - Geographic - Tax Risk.
Concentration Risk,
The Fund is also "non-diversified," which means that the Fund may invest more of
its assets in the securities of fewer issuers than other mutual funds. Thus, the
Fund is also subject to Non-Diversification Risk.
YEARLY performance of Class A Shares*
[Yearly Performance Graph]
<TABLE>
<CAPTION>
ANNUAL RETURN (%)
-----------------
<S> <C>
1990 6.47
1991 9.65
1992 9.17
1993 13.65
1994 -8.61
1995 18.09
1996 4.42
1997 10.30
1998 6.09
</TABLE>
Calendar Year
During the periods shown above, the highest quarterly return was 7.76% (for the
quarter ended 3/31/95), and the lowest was -6.61% (for the quarter ended
3/31/94).
PERFORMANCE TABLE*
<TABLE>
<CAPTION>
Average Annual Total Returns Past Past Since Class A Since Class B
(for periods ended December 31, 1998) One Year Five Years Inception (7/25/89) Inception (6/30/94)
<S> <C> <C> <C> <C>
CLASS A SHARES 1.35% 4.71% 6.94% N/A
CLASS B SHARES 0.30% N/A N/A 6.96%
LEHMAN BROTHERS MUNICIPAL BOND INDEX** 6.47% 6.22% 7.85% 8.02%
</TABLE>
* Performance shown in the bar chart does not reflect any sales charge, while
the average annual total returns shown in the table reflect the maximum
applicable initial or contingent deferred sales charge. The Fund's
performance through December 31, 1998 has benefitted from the agreement of WM
Advisors and its affiliates to limit the Fund's expenses.
** This index includes all investment grade tax-exempt bond issues.
12
<PAGE> 14
- --------------------------------------------------------------------------------
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL fund
OBJECTIVE This Fund seeks to provide as high a level of current income that is
exempt from federal and California state income tax as is consistent with
prudent investment management and preservation of capital.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS The Fund invests primarily in
intermediate-term insured California MUNICIPAL OBLIGATIONS, including MUNICIPAL
LEASES and AMT-SUBJECT BONDS. The weighted average effective maturity of the
Fund's investments is ten years or less, and the maximum effective maturity of
any of its investments is fifteen years. The Fund may also invest in other
municipal obligations and utilize STRATEGIC TRANSACTIONS (derivatives) such as
interest rate futures and options.
Among the principal risks of investing in the Fund are:
<TABLE>
<S> <C>
- - Market Risk, - Derivatives Risk,
- - Credit Risk, - Liquidity Risk,
- - Leveraging Risk, - Management Risk, and
- - Geographic Concentra- - Tax Risk.
tion Risk,
</TABLE>
The Fund is also "non-diversified," which means that the Fund may invest more of
its assets in the securities of fewer issuers than other mutual funds. Thus, the
Fund is also subject to Non-Diversification Risk.
YEARLY performance of Class A Shares*
[California Insured Intermediate Municipal Fund Bar Chart]
<TABLE>
<CAPTION>
ANNUAL RETURN (%)
-----------------
<S> <C>
1995 16.45
1996 3.91
1997 7.14
1998 5.26
</TABLE>
Calendar Year
During the periods shown above, the highest quarterly return was 7.23% (for the
quarter ended 3/31/95), and the lowest was -1.52% (for the quarter ended
12/31/94).
PERFORMANCE TABLE*
<TABLE>
<CAPTION>
Average Annual Total Returns Past Since Class A Since Class B
(for periods ended December 31, 1998) One Year Inception (4/04/94) Inception (6/30/94)
<S> <C> <C> <C>
CLASS A SHARES 0.54% 6.13% N/A
CLASS B SHARES -0.48% N/A 6.05%
LEHMAN BROTHERS MUNICIPAL BOND INDEX** 6.47% 7.78% 8.02%
</TABLE>
* Performance shown in the bar chart does not reflect any sales charge, while
the average annual total returns shown in the table reflect the maximum
applicable initial or contingent deferred sales charge. The Fund's
performance through December 31, 1998 has benefitted from the agreement of WM
Advisors and its affiliates to limit the Fund's expenses.
** This index includes all investment grade tax-exempt bond issues.
13
<PAGE> 15
- --------------------------------------------------------------------------------
FLORIDA INSURED MUNICIPAL fund
OBJECTIVE This Fund seeks to provide as high a level of current income that is
exempt from federal income tax as is consistent with prudent investment
management and preservation of capital. The Fund also seeks to ensure that the
value of its shares is exempt from Florida intangible personal property tax.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS The Fund invests primarily in
intermediate-and long-term insured Florida MUNICIPAL OBLIGATIONS, including
MUNICIPAL LEASES and AMT-SUBJECT BONDS. The Fund may also invest in other
municipal obligations and utilize STRATEGIC TRANSACTIONS (derivatives) such as
interest rate futures and options.
Among the principal risks of investing in the Fund are:
<TABLE>
<S> <C>
- - Market Risk, - Derivatives Risk,
- - Credit Risk, - Liquidity Risk,
- - Leveraging Risk, - Management Risk, and
- - Geographic - Tax Risk.
Concentration Risk,
</TABLE>
The Fund is also "non-diversified," which means that the Fund may invest more of
its assets in the securities of fewer issuers than other mutual funds. Thus, the
Fund is also subject to Non-Diversification Risk.
YEARLY performance of Class A Shares*
[Florida Insured Municipal Fund Bar Chart]
<TABLE>
<CAPTION>
ANNUAL RETURN (%)
-----------------
<S> <C>
1994 -8.48
1995 17.57
1996 3.41
1997 10.01
1998 5.99
</TABLE>
Calendar Year
During the periods shown above, the highest quarterly return was 6.99% (for the
quarter ended 3/31/95), and the lowest was -8.33% (for the quarter ended
3/31/94).
PERFORMANCE TABLE*
<TABLE>
<CAPTION>
Average Annual Total Returns Past Past Since Class A Since Class B
(for periods ended December 31, 1998) One Year Five Years Inception (6/7/93) Inception (6/30/94)
<S> <C> <C> <C> <C>
CLASS A SHARES 1.21% 4.38% 5.17% N/A
CLASS B SHARES 0.20% N/A N/A 6.79%
LEHMAN BROTHERS MUNICIPAL BOND INDEX** 6.47% 6.22% 6.55% 8.02%
</TABLE>
* Performance shown in the bar chart does not reflect any sales charge, while
the average annual total returns shown in the table reflect the maximum
applicable initial or contingent deferred sales charge. The Fund's
performance through December 31, 1998 has benefitted from the agreement of WM
Advisors and its affiliates to limit the Fund's expenses.
** This index includes all investment grade tax-exempt bond issues.
14
<PAGE> 16
- --------------------------------------------------------------------------------
BOND & STOCK fund
OBJECTIVE This Fund seeks to provide continuity of income, conservation of
principal and long-term growth of income and principal.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS The Fund invests primarily in common
stocks, preferred stocks, bonds and convertible securities. At least 25% of the
Fund's assets are generally invested in FIXED-INCOME SECURITIES. The Fund's
investments may include U.S. GOVERNMENT SECURITIES, AMERICAN DEPOSITORY RECEIPTS
(ADRs) and EUROPEAN DEPOSITORY RECEIPTS (EDRs), MORTGAGE-BACKED SECURITIES
(including collateralized mortgage obligations), REPURCHASE AGREEMENTS and REAL
ESTATE INVESTMENT TRUSTS (REITs).
In selecting equity investments for the Fund, WM Advisors looks for long-term
potential for growth in "value" stocks currently selling for less than WM
Advisors believes they are worth. In selecting debt investments for the Fund, WM
Advisors looks for investments that provide regular income in addition to some
opportunity for capital appreciation.
Among the risks of investing in the Fund are:
<TABLE>
<S> <C>
- - Market Risk, - Derivatives Risk,
- - Credit Risk, - Liquidity Risk,
- - Currency Risk, - Management Risk, and
- - Foreign Investment - Smaller Company Risk.
Risk,
</TABLE>
YEARLY performance of Class A Shares*
[Yearly Performance Chart]
<TABLE>
<CAPTION>
ANNUAL RETURN (%)
-----------------
<S> <C>
1989 12.32
1990 0.08
1991 21.75
1992 9.89
1993 9.27
1994 -2.13
1995 31.18
1996 13.6
1997 19.89
1998 6.93
</TABLE>
Calendar Year
During the periods shown above, the highest quarterly return was 12.85% (for the
quarter ended 12/31/98), and the lowest was -10.15% (for the quarter ended
9/30/98).
PERFORMANCE TABLE*
<TABLE>
<CAPTION>
Average Annual Total Returns Past Past Past Since Class B
(for periods ended December 31, 1998) One Year Five Years Ten Years Inception (3/30/94)
<S> <C> <C> <C> <C>
CLASS A SHARES 1.02% 12.05% 11.25% N/A
CLASS B SHARES 1.04% N/A N/A 13.83%
STANDARD & POOR'S 500 COMPOSITE INDEX** 28.58% 24.06% 19.19% 26.50%
LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND*** 9.47% 7.30% 9.34% 8.43%
</TABLE>
* Performance shown in the bar chart does not reflect any sales charge, while
the average annual total returns shown in the table reflect the maximum
applicable initial or contingent deferred sales charge.
** This is an index of 500 industrial, transportation, utility and financial
companies widely regarded by investors as representative of the stock
market.
*** This index is generally considered representative of the U.S. Government and
corporate bond markets.
15
<PAGE> 17
- --------------------------------------------------------------------------------
GROWTH & INCOME fund
OBJECTIVE This Fund seeks to provide long-term capital growth. Current income
is a secondary consideration.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS The Fund invests primarily in common
stocks. In selecting investments for the Fund, WM Advisors looks for common
stocks that it believes are currently undervalued and whose issuers WM Advisors
believes have the potential to increase earnings over time. WM Advisors seeks
out companies that it believes have solid management, a competitive advantage,
and the resources to maintain superior cash flow and profitability over the long
term.
Among the principal risks of investing in the Fund are:
<TABLE>
<S> <C>
- - Market Risk, - Leveraging Risk,
- - Credit Risk, - Derivatives Risk,
- - Currency Risk - Liquidity Risk,
- - Foreign - Management Risk, and
Investment Risk - Smaller Company Risk.
</TABLE>
YEARLY performance of Class A Shares*
[Yearly Performance Chart]
<TABLE>
<CAPTION>
ANNUAL RETURN (%)
-----------------
<S> <C>
1989 12.10
1990 -5.98
1991 27.39
1992 11.01
1993 6.83
1994 2.58
1995 33.15
1996 22.28
1997 29.52
1998 14.41
</TABLE>
Calendar Year
During the periods shown above, the highest quarterly return was 21.33% (for the
quarter ended 12/31/98), and the lowest was -14.72% (for the quarter ended
9/30/90).
PERFORMANCE TABLE*
<TABLE>
<CAPTION>
Average Annual Total Returns Past Past Past Since Class B
(for periods ended December 31, 1998) One Year Five Years Ten Years Inception (3/31/94)
<S> <C> <C> <C> <C>
CLASS A SHARES 8.13% 18.52% 14.05% N/A
CLASS B SHARES 8.58% N/A N/A 20.22%
STANDARD & POOR'S 500 COMPOSITE INDEX** 28.58% 24.06% 19.19% 26.50%
</TABLE>
* Performance shown in the bar chart does not reflect any sales charge, while
the average annual total returns shown in the table reflect the maximum
applicable initial or contingent deferred sales charge.
** This is an index of 500 industrial, transportation, utility and financial
companies widely regarded by investors as representative of the stock market.
16
<PAGE> 18
- --------------------------------------------------------------------------------
NORTHWEST fund
OBJECTIVE This Fund seeks long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS The Fund invests primarily in common
stocks of companies located or doing business in Alaska, Idaho, Montana, Oregon
and Washington. The Fund's investments may include REPURCHASE AGREEMENTS and
REAL ESTATE INVESTMENT TRUSTS (REITS).
In selecting investments for the Fund, WM Advisors looks for equity securities
that it believes are undervalued, yet well-managed, with excellent long-term
growth possibilities.
Among the principal risks of investing in the Fund are:
<TABLE>
<S> <C>
- - Market Risk, - Derivatives Risk,
- - Credit Risk, - Liquidity Risk,
- - Foreign Investment - Management Risk, and
Risk, - Smaller Company Risk.
- - Geographic
Concentration Risk,
</TABLE>
YEARLY performance of Class A Shares*
[Yearly Performance Chart]
<TABLE>
<CAPTION>
ANNUAL RETURN (%)
-----------------
<S> <C>
1989 37.98
1990 -1.14
1991 43.98
1992 3.54
1993 2.50
1994 -1.42
1995 26.52
1996 22.56
1997 32.88
1998 22.98
</TABLE>
Calendar Year
During the periods shown above, the highest quarterly return was 45.26% (for the
quarter ended 12/31/98), and the lowest was -23.42% (for the quarter ended
9/30/90).
PERFORMANCE TABLE*
<TABLE>
<CAPTION>
Average Annual Total Returns Past Past Past Since Class B
(for periods ended December 31, 1998) One Year Five Years Ten Years Inception (3/30/94)
<S> <C> <C> <C> <C>
CLASS A SHARES 16.19% 18.74% 17.29% N/A
CLASS B SHARES 16.85% N/A N/A 20.03%
STANDARD & POOR'S 500 COMPOSITE INDEX** 28.58% 24.06% 19.19% 26.50%
</TABLE>
* Performance shown in the bar chart does not reflect any sales charge, while
the average annual total returns shown in the table reflect the maximum
applicable initial or contingent deferred sales charge. The Fund's
performance through October 31, 1997 benefitted from the agreement of WM
Advisors and its affiliates to limit the Fund's expenses.
** This is an index of 500 industrial, transportation, utility and financial
companies widely regarded by investors as representative of the stock market.
17
<PAGE> 19
- --------------------------------------------------------------------------------
GROWTH fund
OBJECTIVE This Fund seeks long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS The Fund invests primarily in common
stocks, including FOREIGN INVESTMENTS, that, in the opinion of WM Advisors or
the sub-advisor, offer potential for growth. The Fund may also invest in
commercial paper and preferred stock.
In selecting investments for the Fund, the Fund's sub-advisor looks for
individual companies that it believes have exceptional potential for growth,
regardless of economic conditions. Companies are evaluated on their individual
merit, their ability to generate earnings growth, and their superior management
teams, rather than on the broad analysis of a particular sector or market trend.
Among the principal risks of investing in the Fund are:
<TABLE>
<S> <C>
- - Market Risk, - Leveraging Risk,
- - Credit Risk, - Derivatives Risk,
- - Currency Risk, - Liquidity Risk,
- - Foreign Investment - Management Risk, and
Risk, - Smaller Company Risk.
</TABLE>
YEARLY performance of Class A Shares*
[Yearly Performance Chart]
<TABLE>
<CAPTION>
ANNUAL RETURN (%)
-----------------
<S> <C>
1994 0.65
1995 36.25
1996 16.92
1997 9.78
1998 57.10
</TABLE>
Calendar Year
During the periods shown above, the highest quarterly return was 30.52% (for the
quarter ended 12/31/98), and the lowest was -8.60% (for the quarter ended
6/30/94).
PERFORMANCE TABLE*
<TABLE>
<CAPTION>
Average Annual Total Returns Past Past Since Class A Since Class B
(for periods ended December 31, 1998) One Year Five Years Inception (4/5/93) Inception (6/30/94)
<S> <C> <C> <C> <C>
CLASS A SHARES 48.42% 21.18% 21.46% N/A
CLASS B SHARES 50.87% N/A N/A 26.68%
STANDARD & POOR'S 500 INDEX** 28.58% 24.06% 22.63% 28.05%
</TABLE>
* Performance shown in the bar chart does not reflect any sales charge, while
the average annual total returns shown in the table reflect the maximum
applicable initial or contingent deferred sales charge.
** This is an index of 500 industrial, transportation, utility and financial
companies widely regarded by investors as representative of the stock market.
18
<PAGE> 20
- --------------------------------------------------------------------------------
EMERGING GROWTH fund
OBJECTIVE This Fund seeks long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS The Fund invests primarily in equity
securities, including FOREIGN INVESTMENTS, of companies with market
capitalizations of less than $1.4 billion. The Fund may also invest in
REPURCHASE AGREEMENTS and utilize STRATEGIC TRANSACTIONS (derivatives) such as
futures and options on futures. In selecting investments for the Fund, WM
Advisors looks for small companies that it expects to achieve growth in earnings
and revenues or that it believes are currently undervalued relative to their
true worth.
Among the principal risks of investing in the Fund are:
<TABLE>
<S> <C>
- - Market Risk, - Leveraging Risk,
- - Credit Risk, - Derivatives Risk,
- - Currency Risk, - Liquidity Risk,
- - Foreign Investment - Management Risk, and
Risk,
- Smaller Company Risk.
</TABLE>
YEARLY performance of Class A Shares*
[Emerging Growth Fund Bar Chart]
<TABLE>
<CAPTION>
ANNUAL RETURN (%)
-----------------
<S> <C>
1991 39.29
1992 15.40
1993 22.27
1994 -0.34
1995 32.26
1996 8.50
1997 12.63
1998 4.94
</TABLE>
Calendar Year
During the periods shown above, the highest quarterly return was 30.57% (for the
quarter ended 12/31/98), and the lowest was -8.33% (for the quarter ended
3/31/94).
PERFORMANCE TABLE*
<TABLE>
<CAPTION>
Average Annual Total Returns Past Past Since Class A Since Class B
(for periods ended December 31, 1998) One Year Five Years Inception (7/18/90) Inception (6/30/94)
<S> <C> <C> <C> <C>
CLASS A SHARES -0.85% 9.81% 11.94% N/A
CLASS B SHARES -0.33% N/A N/A 13.84%
STANDARD & POOR'S 500 INDEX** 28.58% 24.06% 18.86% 28.05%
RUSSELL 2000 INDEX*** -2.55% 11.86% 13.88% 14.96%
</TABLE>
* Performance shown in the bar chart does not reflect any sales charge, while
the average annual total returns shown in the table reflect the maximum
applicable initial or contingent deferred sales charge.
** This is an index of 500 industrial, transportation, utility and financial
companies widely regarded by investors as representative of the stock
market.
*** This index represents the smallest 2000 companies followed by Russell and is
used to measure the small-cap market.
19
<PAGE> 21
- --------------------------------------------------------------------------------
INTERNATIONAL GROWTH fund
OBJECTIVE This Fund seeks to provide long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS The Fund invests primarily in equity
securities of foreign issuers, including issuers located in developing or
emerging market countries. The Fund may also use STRATEGIC TRANSACTIONS
(derivatives) such as FOREIGN CURRENCY EXCHANGE TRANSACTIONS and REPURCHASE
AGREEMENTS.
In selecting investments for the Fund, the Fund's sub-advisor seeks to identify
foreign stocks with high return on invested capital, excellent cash flow, strong
balance sheets, low institutional ownership, and strong owner management.
Among the principal risks of investing in the Fund are:
<TABLE>
<S> <C>
- - Market Risk, - Leveraging Risk,
- - Credit Risk, - Derivatives Risk,
- - Currency Risk, - Liquidity Risk,
- - Foreign Investment - Management Risk, and
Risk,
- Smaller Company Risk.
</TABLE>
YEARLY performance of Class A Shares*
[International Growth Fund Bar Chart]
<TABLE>
<CAPTION>
ANNUAL RETURN (%)
-----------------
<S> <C>
1991 14.42
1992 -10.57
1993 32.35
1994 -1.31
1995 4.87
1996 8.02
1997 -2.49
1998 4.08
</TABLE>
Calendar Year
During the periods shown above, the highest quarterly return was 13.47% (for the
quarter ended 12/31/98), and the lowest was -17.45% (for the quarter ended
9/30/98).
PERFORMANCE TABLE*
<TABLE>
<CAPTION>
Average Annual Total Returns Past Past Since Class A Since Class B
(for periods ended December 31, 1998) One Year Five Years Inception (7/18/90) Inception (6/30/94)
<S> <C> <C> <C> <C>
CLASS A SHARES -1.60% 1.40% 2.01% N/A
CLASS B SHARES -1.80% N/A N/A 1.73%
MORGAN STANLEY CAPITAL INTERNATIONAL EAFE
INDEX* 20.33% 9.50% 7.13% 8.53%
</TABLE>
* Performance shown in the bar chart does not reflect any sales charge, while
the average annual total returns shown in the table reflect the maximum
applicable initial or contingent deferred sales charge.
** This index includes stock markets of Europe, Australia and the Far East
weighted by capitalization and represents the equity markets of 18 countries.
20
<PAGE> 22
- --------------------------------------------------------------------------------
STRATEGIC GROWTH portfolio
OBJECTIVE This Portfolio seeks to provide long-term capital appreciation. In
general, relative to the other Portfolios, the Strategic Growth Portfolio should
offer you the potential for a higher level of capital growth while exposing you
to corresponding levels of principal risk.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS All of the Portfolios allocate their
assets among certain of the Funds to achieve their objectives. This Portfolio
generally invests at least 75% of its net assets in the Equity Funds.
The Portfolio may invest up to 25% of its assets in each of the Money Market,
Short-Term High Quality Bond and High Yield Funds. It may also invest up to 50%
of its assets in each of the Growth & Income, Northwest, Growth, Emerging Growth
and International Growth Funds.
The Portfolio may also invest in U.S. GOVERNMENT SECURITIES, short-term debt
rated A or higher, commercial paper (including master notes and bank
obligations), REPURCHASE AGREEMENTS and STRATEGIC TRANSACTIONS such as futures
contracts and options.
The Portfolio shares the principal risks of each of the Funds it invests in, as
well as Portfolio Risk.
YEARLY performance of Class A Shares*
[Strategic Growth Portfolio Bar Chart]
<TABLE>
<CAPTION>
ANNUAL RETURN
-------------
<S> <C>
'1996' 14.59
'1997' 12.38
'1998' 22.63
</TABLE>
Calendar Year
During the periods shown above, the highest quarterly return was 21.19% (for the
quarter ended 12/31/98), and the lowest was -12.72% (for the quarter ended
9/30/98).
PERFORMANCE TABLE*
<TABLE>
<CAPTION>
Average Annual Total Returns Past Since Inception
(for periods ended December 31, 1998) One Year (5/31/95)
<S> <C> <C>
CLASS A SHARES 15.88% 16.69%
CLASS B SHARES 16.74% 17.36%
STANDARD & POOR'S 500 COMPOSITE INDEX** 28.58% 29.68%
RUSSELL 3000 INDEX*** 24.14% 26.90%
</TABLE>
* Performance shown in the bar chart does not reflect any sales charge, while
the average annual total returns shown in the table reflect the maximum
applicable initial or contingent deferred sales charge. The performance
through December 31, 1998 has benefitted from the agreement of WM Advisors
and its affiliates to limit the Portfolio's expenses. Performance prior to
November 1, 1996, represents the performance of the Sierra Asset Management
Account ("SAM Account"), Aggressive Growth Strategy, a discretionary asset
allocation account that was the Portfolio's predecessor. The SAM Account's
performance has been adjusted to reflect mutual fund fees and expenses,
however, it was not registered as a mutual fund under the Investment Company
Act of 1940, and therefore it was not subject to certain restrictions that
might have affected its performance.
** This is an index of 500 industrial, transportation, utility and financial
companies widely regarded by investors as representative of the stock
market.
*** This index is intended to represent the equity market as a whole.
21
<PAGE> 23
- --------------------------------------------------------------------------------
CONSERVATIVE GROWTH portfolio
OBJECTIVE This Portfolio seeks to provide long-term capital appreciation. In
general, relative to the other Portfolios, the Conservative Growth Portfolio
should offer you the potential for a low level of income and the potential for a
medium to high level of capital growth while exposing you to a medium level of
principal risk.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS All of the Portfolios allocate their
assets among certain of the Funds to achieve their objectives. This Portfolio
generally invests at least 60% of its net assets in the Equity Funds.
The Portfolio may invest up to 30% of its assets in each of the Money Market,
Short-Term High Quality Bond, U.S. Government Securities, Income and High Yield
Funds. It may also invest up to 40% of its assets in each of the Growth &
Income, Northwest, Growth, Emerging Growth and International Growth Funds.
The Portfolio may also invest in U.S. GOVERNMENT SECURITIES, short-term debt
rated A or higher, commercial paper (including master notes and bank
obligations), REPURCHASE AGREEMENTS and STRATEGIC TRANSACTIONS such as futures
contracts and options.
The Portfolio shares the principal risks of each of the Funds it invests in, as
well as Portfolio Risk.
YEARLY performance of Class A Shares*
[Conservative Growth Portfolio Bar Chart]
<TABLE>
<CAPTION>
ANNUAL RETURN (%)
-----------------
<S> <C>
'1991' 22.87
'1992' 4.46
'1993' 18.58
'1994' -3.47
'1995' 22.65
'1996' 11.26
'1997' 8.65
'1998' 18.82
</TABLE>
Calendar Year
During the periods shown above, the highest quarterly return was 19.39% (for the
quarter ended 12/31/98), and the lowest was -11.99% (for the quarter ended
9/30/98).
PERFORMANCE TABLE*
<TABLE>
<CAPTION>
Average Annual Total Returns Past Past Since Class A Since Class B
(for periods ended December 31, 1998) One Year Five Years Inception (9/30/90) Inception (6/30/94)
<S> <C> <C> <C> <C>
CLASS A SHARES 12.28% 9.93% 12.19% N/A
CLASS B SHARES 12.93% -- 12.94% 12.94%
RUSSELL 3000 INDEX** 24.14% 22.26% 26.90% 26.26%
CAPITAL MARKET BENCHMARK*** 16.03% 12.85% 14.64% 14.41%
</TABLE>
* Performance shown in the bar chart does not reflect any sales charge, while
the average annual total returns shown in the table reflect the maximum
applicable initial or contingent deferred sales charge. The Portfolio's
performance through December 31, 1998 has benefitted from the agreement of
WM Advisors and its affiliates to limit the Portfolio's expenses.
Performance prior to November 1, 1996, represents the performance of the
Sierra Asset Management Account ("SAM Account"), Growth Strategy, a
discretionary asset allocation account that was the Portfolio's predecessor.
The SAM Account's performance has been adjusted to reflect mutual fund fees
and expenses, however, it was not registered as a mutual fund under the
Investment Company Act of 1940, and therefore it was not subject to certain
restrictions that might have affected its performance.
** This index is intended to represent the equity market as a whole.
*** This is a blended mix of capital market indices that is intended to
represent a proxy for portfolio performance. The benchmark allocation is as
follows: 35% S&P 500, 20% MSCI EAFE + Emerging Markets, 20% Lehman Bros.
Mutual Fund (1-5) Gov/Corp Index, 20% Salomon Bros. 90-day T-Bills, and 5%
Russell 2000 Growth. A description of the components of the Portfolio's
Capital Market Index can be found in the Statement of Additional
Information, which you can obtain free of charge by calling 800-222-5852.
22
<PAGE> 24
- --------------------------------------------------------------------------------
BALANCED portfolio
OBJECTIVE This Portfolio seeks to provide as high a level of total return
(consisting of reinvested income and capital appreciation) as is consistent with
reasonable risk. In general, relative to the other Portfolios, the Balanced
Portfolio should offer you the potential for a medium level of income and the
potential for a medium level of capital growth while exposing you to a medium
level of principal risk.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS All of the Portfolios allocate their
investments among certain of the Funds to achieve their objectives. This
Portfolio invests at least 30% and no more than 70% of its net assets in both
the Equity Funds and the Fixed-Income Funds.
The Portfolio may invest up to 40% of its assets in each of the Money Market,
Short-Term High Quality Bond, U.S. Government Securities, Income and High Yield
Funds. It may also invest up to 30% of its assets in each of the Growth &
Income, Northwest, Growth, Emerging Growth and International Growth Funds.
The Portfolio may also invest in U.S. GOVERNMENT SECURITIES, short-term debt
rated A or higher, commercial paper (including master notes and bank
obligations), REPURCHASE AGREEMENTS and STRATEGIC TRANSACTIONS such as futures
contracts and options.
The Portfolio shares the principal risks of each of the Funds it invests in, as
well as Portfolio Risk.
YEARLY performance of Class A Shares*
[Balanced Portfolio Bar Chart]
<TABLE>
<CAPTION>
ANNUAL RETURN (%)
-----------------
<S> <C>
'1991' 17.41
'1992' 2.46
'1993' 16.20
'1994' -4.62
'1995' 21.73
'1996' 8.50
'1997' 10.22
'1998' 16.27
</TABLE>
Calendar Year
During the periods shown above, the highest quarterly return was 14.32% (for the
quarter ended 12/31/98), and the lowest was -8.47% (for the quarter ended
9/30/98).
PERFORMANCE TABLE*
<TABLE>
<CAPTION>
Average Annual Total Returns Past Past Since Class A Since Class B
(for periods ended December 31, 1998) One Year Five Years Inception (9/30/90) Inception (6/30/94)
<S> <C> <C> <C> <C>
CLASS A SHARES 9.88% 8.80% 10.20% N/A
CLASS B SHARES 10.43% -- 11.82% 11.82%
LEHMAN BROTHERS AGGREGATE BOND INDEX** 8.67% 7.27% 9.35% 9.07%
RUSSELL 3000 INDEX*** 24.14% 22.26% 26.90% 26.26%
CAPITAL MARKET BENCHMARK**** 11.42% 9.14% 9.68% 10.18%
</TABLE>
* Performance shown in the bar chart does not reflect any sales charge, while
the average annual total returns shown in the table reflect the maximum
applicable initial or contingent deferred sales charge. The Portfolio's
performance through December 31, 1998 has benefitted from the agreement of
WM Advisors and its affiliates to limit the Portfolio's expenses.
Performance prior to November 1, 1996 represents the performance of the
Sierra Asset Management Account ("SAM Account") Balanced Strategy, a
discretionary asset allocation account, that was the Portfolio's
predecessor. The SAM Account's performance has been adjusted to reflect
mutual fund fees and expenses, however, it was not registered as a mutual
fund under the Investment Company Act of 1940, and therefore it was not
subject to certain restrictions that might have affected its performance.
** This index is intended to represent the fixed-income market as a whole.
*** This index is intended to represent the equity market as a whole.
**** This is a blended mix of capital market indices that is intended to
represent a proxy for portfolio performance. The benchmark allocation is as
follows: 25% Lehman Bros Mutual Fund Short (1-5) Gov/Corp Index, 25%
Salomon Bros 90-day T-Bills, 20% Lehman Bros Mortgage Index, 15% S&P 500,
and 15% MSCI EAFE + Emerging Markets. A description of the components of
the Portfolio's Capital Market Index can be found in the Statement of
Additional Information, which you can obtain free of charge by calling
800-222-5852.
23
<PAGE> 25
- --------------------------------------------------------------------------------
FLEXIBLE INCOME portfolio
OBJECTIVE This Portfolio seeks to provide a high level of total return
(consisting of reinvestment of income with some capital appreciation). In
general, relative to the other Portfolios, the Flexible Income Portfolio should
offer you the potential for a medium to high level of reinvestment income and
the potential for a low to medium level of capital growth, while exposing you to
a low to medium level of principal risk.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS All of the Portfolios allocate their
assets among certain of the Funds to achieve their objectives. This Portfolio
generally invests no more than 30% of its net assets in the Equity Funds.
The Portfolio may invest up to 40% of its assets in each of the Money Market,
Short-Term High Quality Bond, U.S. Government Securities, Income and High Yield
Funds. It may also invest up to 30% of its assets in each of the Growth &
Income, Northwest, Growth and Emerging Growth Funds.
The Portfolio may also invest in U.S. GOVERNMENT SECURITIES, short-term debt
rated A or higher, commercial paper (including master notes and bank
obligations), REPURCHASE AGREEMENTS and STRATEGIC TRANSACTIONS such as futures
contracts and options.
The Portfolio shares the principal risks of the Funds it invests in, as well as
Portfolio Risk.
YEARLY performance of Class A Shares*
[Flexible Income Portfolio Bar Chart]
<TABLE>
<CAPTION>
ANNUAL RETURN (%)
-----------------
<S> <C>
'1994' -6.1
'1995' 20.98
'1996' 6.48
'1997' 10.25
'1998' 9.24
</TABLE>
Calendar Year
During the periods shown above, the highest quarterly return was 5.83% (for the
quarter ended 12/31/98), and the lowest was -3.84% (for the quarter ended
6/30/94).
PERFORMANCE TABLE*
<TABLE>
<CAPTION>
Average Annual Total Returns Past Past Since Class A Since Class B
(for periods ended December 31, 1998) One Year Five Years Inception (3/31/93) Inception (6/30/94)
<S> <C> <C> <C> <C>
CLASS A SHARES 4.32% 6.80% 7.05% N/A
CLASS B SHARES 3.52% -- 9.53% 9.53%
LEHMAN BROTHERS AGGREGATE BOND INDEX** 8.67% 7.27% 9.35% 9.07%
CAPITAL MARKET BENCHMARK*** 8.71% 9.64% 7.23% 8.65%
</TABLE>
* Performance shown in the bar chart does not reflect any sales charge, while
the average annual total returns shown in the table reflect the maximum
applicable initial or contingent deferred sales charge. The Portfolio's
performance through December 31, 1998 has benefitted from the agreement of
WM Advisors and its affiliates to limit the Portfolio's expenses.
Performance prior to November 1, 1996 represents the performance of the
Sierra Asset Management Account ("SAM Account") Value Strategy, a
discretionary asset allocation account, that was the Portfolio's
predecessor. The SAM Account's performance has been adjusted to reflect
mutual fund fees and expenses, however, it was not registered as a mutual
fund under the Investment Company Act of 1940, and therefore it was not
subject to certain restrictions that might have affected its performance.
** This index is intended to represent the fixed-income market as a whole.
*** This is a blended mix of capital market indices that is intended to
represent a proxy for portfolio performance. The benchmark allocation is as
follows: 40% Lehman Bros Mutual Fund Short (1-5) Gov/Corp Index, 40% Salomon
Bros 90-day T-Bills, 10% Lehman Bros Mortgage Index and 10% S&P 500. A
description of the components of the Portfolio's Capital Market Index can be
found in the Statement of Additional Information, which you can obtain free
of charge by calling 800-222-5852.
24
<PAGE> 26
- --------------------------------------------------------------------------------
INCOME portfolio
OBJECTIVE This Portfolio seeks long-term total return through reinvestment of
current income consistent with preservation of capital. In general, relative to
the other Portfolios, the Income Portfolio should offer you the potential for a
high level of income while maintaining principal and exposing you to a low level
of principal risk.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS All of the Portfolios allocate their
assets among certain of the Funds to achieve their objectives. This Portfolio
generally invests 100% of its net assets in the Fixed-Income Funds.
The Portfolio may invest up to 50% of its assets in each of the Money Market,
Short-Term High Quality Bond and U.S. Government Securities Funds. It may also
invest up to 40% of its assets in either of the Income and High Yield Funds.
The Portfolio may also invest in U.S. GOVERNMENT SECURITIES, short-term debt
rated A or higher, commercial paper (including master notes and bank
obligations), REPURCHASE AGREEMENTS and STRATEGIC TRANSACTIONS such as futures
contracts and options.
The Portfolio shares the principal risks of each of the Funds it invests in, as
well as Portfolio Risk.
YEARLY performance of Class A Shares*
[Income Portfolio Bar Chart]
<TABLE>
<CAPTION>
ANNUAL RETURN (%)
-----------------
<S> <C>
'1991' 16.51
'1992' 7.12
'1993' 10.51
'1994' -7.5
'1995' 16.67
'1996' 2.24
'1997' 8.29
'1998' 5.28
</TABLE>
Calendar Year
During the periods shown above, the highest quarterly return was 5.57% (for the
quarter ended 6/30/95), and the lowest was -4.34% (for the quarter ended
3/31/94).
PERFORMANCE TABLE*
<TABLE>
<CAPTION>
Average Annual Total Returns Past Past Since Class A Since Class B
(for periods ended December 31, 1998) One Year Five Years Inception (9/30/90) Inception (6/30/94)
<S> <C> <C> <C> <C>
CLASS A SHARES 0.54% 3.73% 6.73% N/A
CLASS B SHARES -0.48% -- 5.96% 5.96%
LEHMAN BROTHERS AGGREGATE BOND INDEX** 8.67% 7.27% 9.35% 9.07%
CAPITAL MARKET BENCHMARK*** 6.23% 6.05% 6.68% 6.89%
</TABLE>
* Performance shown in the bar chart does not reflect any sales charge, while
the average annual total returns shown in the table reflect the maximum
applicable initial or contingent deferred sales charge. The Portfolio's
performance through December 31, 1998 has benefitted from the agreement of
WM Advisors and its affiliates to limit the Portfolio's expenses.
Performance prior to November 1, 1996 represents the performance for the
Sierra Asset Management Agreement Account ("SAM Account"), Fixed Strategy, a
discretionary asset allocation account that was the Portfolio's predecessor.
The SAM Account's performance has been adjusted to reflect mutual fund fees
and expenses, however, it was not registered as a mutual fund under the
Investment Company Act of 1940, and therefore it was not subject to certain
restrictions that might have affected its performance.
** This index is intended to represent the fixed-income market as a whole.
*** This is a blended mix of capital market indices that is intended to
represent a proxy for portfolio performance. The benchmark allocation is as
follows: 20% Salomon Bros, 90-day T-Bills, 30% Lehman Bros Mutual Fund Short
(1-5) Gov/Corp Index 10% Lehman Bros Mortgages Index and 10% Lehman Bros BAA
LT Corporate Bond Index. A description of the components of the Portfolio's
Capital Market Index can be found in the Statement of Additional
Information, which you can obtain free of charge by calling 800-222-5852.
25
<PAGE> 27
SUMMARY OF PRINCIPAL RISKS
The value of your investment in a Fund or Portfolio changes with the value of
the investments held by that Fund or Portfolio. Many factors can affect that
value, and it is possible that you may lose money on investments in the Funds
and Portfolios. Factors that may affect a particular Fund or Portfolio as a
whole are called "principal risks." They are summarized in this section. The
chart at the end of this section displays similar information. All Funds and
Portfolios are subject to principal risks. These risks can change over time,
because the types of investments made by the Funds and Portfolios can change
over time. Investments mentioned in this summary and described in greater detail
under "Description of the Funds" or "Common Investment Practices" appear in BOLD
TYPE. Those sections also include more information about the Funds, their
investments and the related risks.
+ MARKET RISK. Each of the Funds and Portfolios is subject to market risk,
which is the general risk of unfavorable changes in the market value of a
Fund's portfolio securities. The Equity Funds, by investing in equity
securities, such as common stock, preferred stock and convertible securities,
are exposed to the risk of changes in the value of equity securities. Those
risks include the risks of broader market declines as well as more specific
risks affecting the issuer, such as management performance, financial
leverage, industry problems and reduced demand for the issuer's goods or
services.
Another aspect of market risk is interest rate risk. As interest rates rise,
your investment in a Fund or Portfolio is likely to be worth less because
its income-producing equity or debt investments are likely to be worth less.
Even Funds such as the Short Term High Quality Bond, U.S. Government
Securities and Target Maturity 2002 Funds are subject to interest rate risk,
even though they generally invest substantial portions of their assets in
the highest quality debt securities, such as U.S. GOVERNMENT SECURITIES.
Interest rate risk is generally greater for Funds that invest in debt
securities with longer maturities. This risk is usually compounded for Funds
such as the Tax-Exempt Bond, California Municipal, Florida Insured
Municipal, Income and U.S. Government Securities Funds that invest
significantly in GOVERNMENT STRIPPED MORTGAGE-BACKED or other ASSET-BACKED
SECURITIES that may be prepaid. These securities have variable maturities
that tend to lengthen when that is least desirable -- when interest rates
are rising. Increased market risk is also likely for Funds such as the
Income, Short Term High Quality Bond and Target Maturity 2002 Funds that
invest in debt securities paying no interest, such as ZERO-COUPON,
PRINCIPAL-ONLY and INTEREST-ONLY SECURITIES.
+ CREDIT RISK. Each of the Funds may be subject to credit risk to the extent it
invests in FIXED-INCOME SECURITIES. This is the risk that the issuer or the
guarantor (or, in the case of the California Insured Intermediate Municipal
Fund and the Florida Insured Municipal Fund, the insurer) of a debt security,
or the counterparty to any of a Fund's portfolio transactions (including
without limitation REPURCHASE AGREEMENTS, REVERSE REPURCHASE AGREEMENTS,
LENDING OF SECURITIES and other over-the-counter transactions), will be unable
or unwilling to make timely principal and/or interest payments, or to
otherwise honor its obligations. Varying degrees of credit risk, often
reflected in Credit Ratings, apply. Credit risk is particularly significant
for Funds such as the Income, High Yield, Tax-Exempt Bond, Bond & Stock,
Growth & Income, Growth and Emerging Growth Funds that invest significantly in
LOWER-RATED SECURITIES. These securities and similar unrated securities
(commonly known as "junk bonds") have speculative elements or are
predominantly speculative credit risks. The Short Term High Quality Bond,
Income, High Yield, Bond & Stock, Growth & Income, Northwest, Growth, Emerging
Growth and International Growth Funds, which make FOREIGN INVESTMENTS
denominated in U.S. dollars, are also subject to increased credit risk because
of the difficulties of requiring foreign entities to honor their contractual
commitments, and because a number of foreign governments and other issuers are
already in default. The Money Market Fund may also make U.S. dollar
denominated FOREIGN INVESTMENTS.
+ CURRENCY RISK. Funds such as the Short Term High Quality Bond, Income, High
Yield, Bond & Stock, Growth & Income, Growth, Emerging
26
<PAGE> 28
Growth and International Growth Funds that invest in securities denominated
in, and/or receive revenues in, foreign currencies will be subject to currency
risk. This is the risk that those currencies will decline in value relative to
the U.S. dollar, or, in the case of hedging positions, that the U.S. dollar
will decline in value relative to the currency hedged.
+ FOREIGN INVESTMENT RISK. Each of the Funds with FOREIGN INVESTMENTS such as
the Short Term High Quality Bond, Income, High Yield, Bond & Stock, Growth &
Income, Growth, Emerging Growth and International Growth Funds, may experience
more rapid and extreme changes in value than Funds with investments solely in
securities of U.S. companies. This is because the securities markets of many
foreign countries are relatively small, with a limited number of companies
representing a small number of industries. Additionally, foreign securities
issuers are usually not subject to the same degree of regulation as U.S.
issuers. Reporting, accounting and auditing standards of foreign countries
differ, in some cases significantly, from U.S. standards. Also,
nationalization, expropriation or confiscatory taxation, currency blockage,
political changes or diplomatic developments could adversely affect a Fund's
investments in a foreign country. In the event of nationalization,
expropriation or other confiscation, a Fund could lose its entire investment.
Adverse developments in certain regions, such as Southeast Asia, may adversely
affect the markets of other countries whose economies appear to be unrelated.
The Money Market, and Northwest Funds may also make U.S. dollar denominated
FOREIGN INVESTMENTS.
+ GEOGRAPHIC CONCENTRATION RISK. Funds such as the California Money, Northwest,
California Municipal, California Insured Intermediate Municipal and Florida
Insured Municipal Funds that invest significant portions of their assets in
concentrated geographic areas like the northwestern United States, California
or Florida generally have more exposure to regional economic risks than Funds
making investments more broadly.
+ LEVERAGING RISK. When a Fund is BORROWING money or otherwise leveraging its
portfolio, the value of an investment in that Fund will be more volatile and
all other risks will tend to be compounded. The Income, Short-Term High
Quality Bond, U.S. Government Securities, California Municipal, California
Insured Intermediate Municipal, Florida Insured Municipal, Growth,
International Growth and Emerging Growth Funds may achieve leverage by using
REVERSE REPURCHASE AGREEMENTS and/or DOLLAR ROLLS. The Municipal Funds, the
Fixed-Income Funds, and the Growth & Income Fund may achieve leverage through
the use of INVERSE FLOATING RATE INVESTMENTS. Funds such as the California
Money, California Insured Intermediate Municipal, Short Term High Quality
Bond, Emerging Growth, Growth and International Growth Funds may also take on
leveraging risk by investing collateral from securities loans, by using
STRATEGIC TRANSACTIONS (derivatives) and by BORROWING money to meet redemption
requests.
+ NON-DIVERSIFICATION RISK. Most analysts believe that overall risk can be
reduced through diversification, while concentration of investments in a small
number of securities increases risk. Each of the California Money, California
Municipal, California Insured Intermediate Municipal and Florida Insured
Municipal Funds is NON-DIVERSIFIED. This means they can invest a greater
portion of their assets in a relatively small number of issuers and will have
greater concentration of risk. Some of those issuers may present substantial
credit or other risks.
+ DERIVATIVES RISK. Each of the Funds, except the Money Funds, may, subject to
the limitations and restrictions stated elsewhere in this Prospectus and the
SAI, enter into STRATEGIC TRANSACTIONS involving derivatives such as forward
contracts, futures contracts, options, swaps, caps, floors and collars, which
are financial contracts whose value depends on, or is derived from, the value
of something else, such as an underlying asset, reference rate or index. In
addition to other risks such as the credit risk of the counterparty,
derivatives involve the risk of mispricing or improper valuation and the risk
that changes in the value of the derivative may not correlate perfectly with
relevant assets, rates and indices.
+ LIQUIDITY RISK. Liquidity risk exists when particular investments are
difficult to purchase or sell, possibly preventing a Fund from selling out of
these ILLIQUID SECURITIES at an advantageous price. All of the Funds may be
subject to liquidity risk. Funds that engage in STRATEGIC TRANSACTIONS, make
27
<PAGE> 29
FOREIGN INVESTMENTS, or invest in securities involving substantial market
and/or credit risk tend to be subject to greater liquidity risk. In addition,
liquidity risk increases for Funds that hold RESTRICTED SECURITIES.
+ MANAGEMENT RISK. Each Fund and Portfolio is subject to management risk
because it is an actively managed investment portfolio. WM Advisors, or the
sub-advisor if applicable, will apply its investment techniques and risk
analyses in making investment decisions for the Funds or Portfolios, but there
can be no guarantee that they will produce the desired results. In some cases
derivatives and other investments may be unavailable or WM Advisors or the
sub-advisor may choose not to use them under market conditions when their use
would have been beneficial to the Funds or Portfolios.
+ SMALLER COMPANY RISK. Market risk and liquidity risk are particularly
pronounced for stocks of companies with relatively small market
capitalizations. These companies may have limited product lines, markets or
financial resources, or they may depend on a few key employees. The Equity
Funds, the High Yield Fund, and the Emerging Growth Fund in particular,
generally have the greatest exposure to this risk.
+ TAX RISK. The Tax Exempt Money Market, California Money and the Municipal
Funds are subject to the risk that some or all of the interest they receive
might become taxable by law or be determined by the Internal Revenue Service
(or the relevant state tax authority) to be taxable. In this event, the value
of the Funds' investments would likely fall, and some or all of the income
distributions paid by the Funds might become taxable. In addition, some or all
of the income distributions paid by these Funds may be subject to federal
alternative minimum income tax.
+ MONEY MARKET RISK. While the Money Funds are designed to be relatively low
risk investments, they are not entirely free of risk. The Money Funds may not
be able to maintain a net asset value of $1.00 per share, as a result of a
deterioration in the credit quality of issuers whose securities the Funds
hold, or an increase in interest rates. In addition, the Money Funds are still
subject to the risk that the value of your investment may be eroded over time
by inflation.
+ PORTFOLIO REALLOCATION RISK. From time to time, one or more of a Portfolio's
underlying Funds may experience relatively large investments or redemptions
due to reallocations or rebalancings by the Portfolios as recommended by WM
Advisors. These transactions will affect such Funds, since the Funds that
experience redemptions as a result of reallocations or rebalancings may have
to sell portfolio securities and Funds that receive additional cash will have
to invest such cash. While it is impossible to predict the overall impact of
these transactions over time, there could be adverse effects on portfolio
management to the extent that the Funds may be required to sell securities or
invest cash at times when they would not otherwise do so. These transactions
could also have tax consequences if sales of securities resulted in gains and
could also increase transaction costs. WM Advisors is committed to minimizing
such impact on the Funds to the extent it is consistent with pursuing the
investment objectives of the Portfolios. WM Advisors may nevertheless face
conflicts in fulfilling its responsibilities. WM Advisors will at all times
monitor the impact on the Funds of transactions by the Portfolios.
+ PORTFOLIO RISK. Each of the Portfolios allocates its assets among the Funds
as determined by its Advisor and in accordance with the investment
restrictions discussed above. As a result, the Portfolios share the risks of
each of the Funds in which they invest, which are described above.
In particular, the Portfolios may be subject to credit risk. For instance,
the Strategic Growth Portfolio can invest up to 50% of its assets in each of
the Growth, Growth & Income and Emerging Growth Funds and up to 25% of its
assets in the High Yield Fund. Each of these Funds may invest significant
amounts of its assets in lower-rated securities ("junk bonds"). The
Portfolios may also be exposed to FOREIGN INVESTMENT RISK through their
investments in the Growth or Emerging Growth Funds. In choosing among the
Portfolios, investors should understand the risks of each of the Funds and
the extent to which each Portfolio invests in each Fund.
Investing in Funds through the Portfolios involves certain additional
expenses and tax results that would not be present in a direct investment in
the Funds. See "Dividends, Capital Gains and Taxes"
28
<PAGE> 30
for additional information about the tax implications of investing in the
Portfolios.
Under certain circumstances, a Fund may determine to pay a redemption
request by a Portfolio wholly or partly by a distribution in kind of
securities from its portfolio, instead of cash. In such cases, the
Portfolios may hold portfolio securities until WM Advisors determines that
it is appropriate to dispose of such securities.
The officers, trustees, advisor, distributor and transfer agent of the
Portfolios serve in the same capacities for the Funds. Conflicts may arise
as these persons and companies seek to fulfill their fiduciary
responsibilities to the Portfolios and the Funds.
29
<PAGE> 31
PRINCIPAL RISKS by fund
The following chart summarizes the Principal Risks of each Fund other than
Market Risk, Credit Risk, Liquidity Risk, Management Risk and Portfolio
Reallocation Risk, which apply to all of the Funds. Risks not marked for a
particular Fund may, however, still apply to some extent to that Fund at various
times.
<TABLE>
<CAPTION>
FOREIGN GEOGRAPHIC SMALLER MONEY
CURRENCY INVESTMENT CONCENTRATION LEVERAGING NON-DIVERSIFICATION DERIVATIVES COMPANY TAX MARKET
FUND RISK RISK RISK RISK RISK RISK RISK RISK RISK
------------------ -------- ---------- ------------- ---------- ------------------- ----------- ------- ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MONEY
MARKET X X
fund
TAX-EXEMPT
MONEY MARKET X X
fund
CALIFORNIA
MONEY X X X X
fund
SHORT TERM
HIGH QUALITY BOND X X X X
fund
TARGET
MATURITY 2002 X X
fund
U.S. GOVERNMENT
SECURITIES X X
fund
INCOME
fund X X X X
HIGH YIELD
fund X X X X X
TAX-EXEMPT
BOND X X X
fund
CALIFORNIA
MUNICIPAL X X X X X
fund
CALIFORNIA INSURED
INTERMEDIATE X X X X X
MUNICIPAL fund
FLORIDA INSURED
MUNICIPAL X X X X X
fund
BOND &
STOCK X X X X
fund
GROWTH &
INCOME X X X X X
fund
NORTHWEST
fund X X X X
GROWTH
fund X X X X X
EMERGING
GROWTH X X X X X
fund
INTERNATIONAL
GROWTH X X X X X
fund
<CAPTION>
<S> <C>
</TABLE>
30
<PAGE> 32
- --------------------------------------------------------------------------------
FEES AND EXPENSES OF THE FUNDS
AND PORTFOLIOS
This table summarizes the fees and expenses that you may pay if you invest in
Class A or Class B shares of a Fund or Portfolio. Each of the Funds may offer
other classes of shares that are subject to different fees and expenses. For
information about other classes of shares offered by the Funds, please contact
WM Shareholder Services at 800-222-5852. The Examples on the next two pages are
intended to help you compare the cost of investing in the Funds and Portfolios
with the costs of investing in other mutual funds. The Examples assume that your
investment has a 5% return each year, as required by the Securities and Exchange
Commission, and that the Fund's or Portfolio's operating expenses remain the
same. Your actual costs may be higher or lower than those in the Examples.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES CLASS A CLASS B
(fees paid directly from your investment) SHARES (in %) SHARES (in %)
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum sales charge (load) imposed on purchases (as a
percentage of offering price)
Equity Funds and Strategic Growth, Conservative Growth and
Balanced Portfolios 5.50 0.00
----------------------------------------------------------------------------------------------------
Fixed-Income Funds, Municipal Funds and Flexible Income and
Income Portfolios 4.50(1) 0.00
----------------------------------------------------------------------------------------------------
Money Funds 0.00(2) 0.00
----------------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) (as a percentage of
original purchase price or redemption proceeds, as
applicable)(5) 0.00(3) 5.00(4)
----------------------------------------------------------------------------------------------------
(1) 3.50% for Short Term High Quality Bond Fund and 2.00% for Target Maturity 2002 Fund.
(2) Regular sales charges apply when Class A shares of a Money Market Fund (on which no sales
charge was paid at time of purchase) are exchanged for shares of any other Fund.
(3) Certain investors who purchase Class A shares without paying an initial sales charge may
be subject to a deferred sales charge of 1.00% on redemptions within the first year or 0.50%
on redemptions within the second year after purchase. Class A shares are not otherwise
subject to a deferred sales charge.
(4) The maximum deferred sales charge is imposed on shares redeemed in the first year. For
shares held longer than one year, the deferred sales charge declines according to the
schedules set forth under "Buying Class B Shares -- Contingent deferred sales charge" in
this Prospectus. The maximum deferred sales charge for Class B shares of the Short Term
High Quality Bond Fund is 4.00%.
(5) A $10 fee may be charged for redemptions made by wire transfer.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE> 33
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
ANNUAL FUND
OPERATING EXPENSES
(expenses that are deducted
CLASS A SHARES from Fund assets)
-----------------------------------------------------------------------------------------------------------
Total
Annual
Service Fund
Management (12b-1) Other Operating Expense Net
Fees Fees(4) Expenses Expenses Reimbursement Expenses
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Money Market Fund 0.45% 0.00% 0.22% 0.67% N/A 0.67%
-----------------------------------------------------------------------------------------------------------
Tax-Exempt Money Market Fund(1) 0.45 0.00 0.27 0.72 0.15% 0.57
-----------------------------------------------------------------------------------------------------------
California Money Fund(1) 0.45 0.00 0.42 0.87 0.02 0.85
-----------------------------------------------------------------------------------------------------------
Short Term High Quality Bond
Fund(1) 0.50 0.25 0.65 1.40 0.58 0.82
-----------------------------------------------------------------------------------------------------------
Target Maturity 2002 Fund(1) 0.25 0.25 0.97 1.47 0.47 1.00
-----------------------------------------------------------------------------------------------------------
U.S. Government Securities
Fund(2,3) 0.50 0.25 0.66 1.41 0.45 0.96
-----------------------------------------------------------------------------------------------------------
Income Fund(3) 0.50 0.25 0.19 0.94 N/A 0.94
-----------------------------------------------------------------------------------------------------------
High Yield Fund(1) 0.63 0.25 0.34 1.22 0.63 0.59
-----------------------------------------------------------------------------------------------------------
Tax-Exempt Bond Fund 0.50 0.25 0.09 0.84 N/A 0.84
-----------------------------------------------------------------------------------------------------------
California Municipal Fund(3) 0.50 0.25 0.10 0.85 N/A 0.85
-----------------------------------------------------------------------------------------------------------
California Insured Intermediate
Municipal Fund(3) 0.50 0.25 0.20 0.95 N/A 0.95
-----------------------------------------------------------------------------------------------------------
Florida Insured Municipal
Fund(1,3) 0.50 0.25 0.45 1.20 0.20 1.00
-----------------------------------------------------------------------------------------------------------
Bond & Stock Fund 0.59 0.25 0.13 0.97 N/A 0.97
-----------------------------------------------------------------------------------------------------------
Growth & Income Fund 0.55 0.25 0.14 0.94 N/A 0.94
-----------------------------------------------------------------------------------------------------------
Northwest Fund 0.63 0.25 0.22 1.10 N/A 1.10
-----------------------------------------------------------------------------------------------------------
Growth Fund(2,3) 0.85 0.25 0.38 1.48 0.18 1.30
-----------------------------------------------------------------------------------------------------------
Emerging Growth Fund(3) 0.85 0.25 0.56 1.66 N/A 1.66
-----------------------------------------------------------------------------------------------------------
International Growth Fund 1.00 0.25 0.61 1.86 N/A 1.86
-----------------------------------------------------------------------------------------------------------
Strategic Growth Portfolio(5) 0.15 0.25 0.73 1.13 N/A 1.13
-----------------------------------------------------------------------------------------------------------
Conservative Growth Portfolio(5) 0.15 0.25 0.63 1.03 N/A 1.03
-----------------------------------------------------------------------------------------------------------
Balanced Portfolio(5) 0.15 0.25 0.62 1.02 N/A 1.02
-----------------------------------------------------------------------------------------------------------
Flexible Income Portfolio(1,5) 0.15 0.25 0.97 1.37 0.37 1.00
-----------------------------------------------------------------------------------------------------------
Income Portfolio(1,5) 0.15 0.25 1.13 1.53 0.53 1.00
-----------------------------------------------------------------------------------------------------------
<CAPTION>
- --- ---------------------------------------------
EXAMPLES: You would pay the
following expenses on a $10,000
investment assuming a 5% annual
return and redemption at the end of
each period:
---------------------------------------------
One Three Five Ten
Year Years Years Years
---------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 68 $ 214 $ 376 $ 835
---------------------------------------------
74 230 404 894
---------------------------------------------
89 278 486 1,073
---------------------------------------------
488 778 1,094 1,971
---------------------------------------------
347 656 992 1,922
---------------------------------------------
587 876 1,191 2,065
--------------------------------------------
542 736 950 1,553
--------------------------------------------
569 820 1,095 1,861
--------------------------------------------
532 706 898 1,440
--------------------------------------------
533 709 904 1,452
--------------------------------------------
543 739 956 1,564
--------------------------------------------
567 814 1,084 1,839
--------------------------------------------
644 842 1,061 1,674
--------------------------------------------
641 833 1,045 1,641
--------------------------------------------
656 880 1,127 1,816
--------------------------------------------
692 992 1,319 2,221
--------------------------------------------
709 1,045 1,408 2,407
--------------------------------------------
729 1,103 1,506 2,610
--------------------------------------------
583 864 1,171 2,022
--------------------------------------------
649 860 1,091 1,740
--------------------------------------------
648 857 1,086 1,729
--------------------------------------------
583 864 1,171 2,022
--------------------------------------------
599 912 1,252 2,191
--------------------------------------------
</TABLE>
(1) Reflects the Advisor's obligation to limit Total Annual Fund Operating
Expenses through October 31, 1999, as described on page 62.
(2) Reflects the Advisor's obligation to limit Total Annual Fund Operating
Expenses through October 31, 2000, as described on page 62.
(3) Management fees shown have been restated to reflect current contractual
rates.
(4) 12b-1 fees represent servicing fees which are paid to the Distributor.
See "Which Class of Shares is Best for Me -- Distribution Plans."
(5) Does not include underlying Fund expenses that the Portfolios bear
indirectly.
- --------------------------------------------------------------------------------
32
<PAGE> 34
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
ANNUAL FUND
OPERATING EXPENSES
(expenses that are deducted
CLASS B SHARES from Fund assets)
----------------------------------------------------------------------------------------------------------
Distribution Total
and Annual
Service Fund
Management (12b-1) Other Operating Expense Net
Fees Fees(4) Expenses Expenses Reimbursement Expenses
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Money Market Fund 0.45% 1.00% 0.20% 1.65% N/A 1.65%
----------------------------------------------------------------------------------------------------------
Tax-Exempt Money Market
Fund(1) 0.45 1.00 0.35 1.80 0.15% 1.65
----------------------------------------------------------------------------------------------------------
California Money Fund(1) 0.45 1.00 0.60 2.05 0.02 2.03
----------------------------------------------------------------------------------------------------------
Short Term High Quality Bond
Fund(1) 0.50 1.00 0.68 2.18 0.58 1.60
----------------------------------------------------------------------------------------------------------
U.S. Government Securities
Fund(2, 3) 0.50 1.00 0.68 2.18 0.45 1.73
----------------------------------------------------------------------------------------------------------
Income Fund(3) 0.50 1.00 0.21 1.71 N/A 1.71
----------------------------------------------------------------------------------------------------------
High Yield Fund(1) 0.63 1.00 0.39 2.02 0.63 1.39
----------------------------------------------------------------------------------------------------------
Tax-Exempt Bond Fund 0.50 1.00 0.12 1.62 N/A 1.62
----------------------------------------------------------------------------------------------------------
California Municipal Fund(3) 0.50 1.00 0.11 1.61 N/A 1.61
----------------------------------------------------------------------------------------------------------
California Insured
Intermediate Municipal
Fund(3) 0.50 1.00 0.20 1.70 N/A 1.70
----------------------------------------------------------------------------------------------------------
Florida Insured Municipal
Fund(1, 3) 0.50 1.00 0.45 1.95 0.20 1.75
----------------------------------------------------------------------------------------------------------
Bond & Stock Fund 0.59 1.00 0.17 1.76 N/A 1.76
----------------------------------------------------------------------------------------------------------
Growth & Income Fund(1) 0.55 1.00 0.24 1.79 0.03 1.76
----------------------------------------------------------------------------------------------------------
Northwest Fund 0.63 1.00 0.32 1.95 N/A 1.95
----------------------------------------------------------------------------------------------------------
Growth Fund(2, 3) 0.85 1.00 0.48 2.33 0.28 2.05
----------------------------------------------------------------------------------------------------------
Emerging Growth Fund(3) 0.85 1.00 0.77 2.62 N/A 2.62
----------------------------------------------------------------------------------------------------------
International Growth Fund 1.00 1.00 0.97 2.97 N/A 2.97
----------------------------------------------------------------------------------------------------------
Strategic Growth
Portfolio(6) 0.15 1.00 0.73 1.88 N/A 1.88
----------------------------------------------------------------------------------------------------------
Conservative Growth
Portfolio(6) 0.15 1.00 0.63 1.78 N/A 1.78
----------------------------------------------------------------------------------------------------------
Balanced Portfolio(6) 0.15 1.00 0.62 1.77 N/A 1.77
----------------------------------------------------------------------------------------------------------
Flexible Income
Portfolio(1,6) 0.15 1.00 0.97 2.12 0.37 1.75
----------------------------------------------------------------------------------------------------------
Income Portfolio(1,6) 0.15 1.00 1.13 2.28 0.53 1.75
----------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------- ---------------------------------------------------------------------------
EXAMPLES: You would pay the following
expenses on a $10,000 investment assuming a 5%
annual return and either
a) redemption at the end of each period or
CLASS B SHARES b) no redemption:
---------------------------------------- -----------------------------------------------------------------------
(a) (b)
-----------------------------------------------------------------
One Three Five Ten One Three Five Ten
Year Years Years Years(5) Year Years Years Years(5)
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market Fund 668 820 1,003 1,691 168 520 903 1,691
-------------------------------------------------------------------------------------------------
Tax-Exempt Money Market
Fund(1) 683 866 1,081 1,829 183 566 981 1,829
-------------------------------------------------------------------------------------------------
California Money Fund(1) 708 943 1,209 2,073 208 643 1,109 2,073
-------------------------------------------------------------------------------------------------
Short Term High Quality Bond
Fund(1) 621 882 1,176 2,313 221 682 1,176 2,313
-------------------------------------------------------------------------------------------------
U.S. Government Securities
Fund(2, 3) 721 982 1,276 2,316 221 682 1,176 2,316
-------------------------------------------------------------------------------------------------
Income Fund(3) 674 839 1,034 1,813 174 539 934 1,813
-------------------------------------------------------------------------------------------------
High Yield Fund(1) 705 934 1,194 2,140 205 634 1,094 2,140
-------------------------------------------------------------------------------------------------
Tax-Exempt Bond Fund 665 811 987 1,711 165 511 887 1,711
-------------------------------------------------------------------------------------------------
California Municipal Fund(3) 664 808 982 1,706 164 508 882 1,706
-------------------------------------------------------------------------------------------------
California Insured
Intermediate Municipal
Fund(3) 673 836 1,029 1,808 173 536 929 1,808
-------------------------------------------------------------------------------------------------
Florida Insured Municipal
Fund(1, 3) 698 912 1,158 2,078 198 612 1,058 2,078
-------------------------------------------------------------------------------------------------
Bond & Stock Fund 679 854 1,060 1,863 179 554 960 1,863
-------------------------------------------------------------------------------------------------
Growth & Income Fund(1) 682 863 1,075 1,879 182 563 975 1,879
-------------------------------------------------------------------------------------------------
Northwest Fund 698 912 1,158 2,052 198 612 1,058 2,052
-------------------------------------------------------------------------------------------------
Growth Fund(2, 3) 736 1,027 1,352 2,450 236 727 1,252 2,450
-------------------------------------------------------------------------------------------------
Emerging Growth Fund(3) 765 1,114 1,497 2,717 265 814 1,397 2,717
-------------------------------------------------------------------------------------------------
International Growth Fund 800 1,218 1,668 3,024 300 918 1,568 3,024
-------------------------------------------------------------------------------------------------
Strategic Growth
Portfolio(6) 691 891 1,122 2,003 191 591 1,022 2,003
-------------------------------------------------------------------------------------------------
Conservative Growth
Portfolio(6) 681 860 1,070 1,895 181 560 970 1,895
-------------------------------------------------------------------------------------------------
Balanced Portfolio(6) 680 857 1,065 1,884 180 557 965 1,884
-------------------------------------------------------------------------------------------------
Flexible Income
Portfolio(1,6) 715 964 1,245 2,258 215 664 1,145 2,258
-------------------------------------------------------------------------------------------------
Income Portfolio(1,6) 731 1,012 1,326 2,424 231 712 1,226 2,424
-------------------------------------------------------------------------------------------------
</TABLE>
(1) Reflects the Advisor's obligation to limit Total Annual Fund Operating
Expenses through October 31, 1999, as described on page 62.
(2) Reflects the Advisor's obligation to limit Total Annual Fund Operating
Express through October 31, 2000, as described on page 62.
(3) Management fees shown have been restated to reflect current contractual
rates.
(4) 0.25% of the 12b-1 fees shown represent servicing fees which are paid to
the Distributor. Long-term Class B shareholders may pay more than the
sales charge paid by Class A shareholders. See "Which Class of Shares is
Best for Me -- Distribution Plans."
(5) Class B shares convert to Class A shares after eight years; accordingly,
the expense amounts for years nine and ten are based on Class A share
expenses.
(6) Does not include underlying Fund expenses that the Portfolios bear
indirectly.
- --------------------------------------------------------------------------------
33
<PAGE> 35
ESTIMATED AGGREGATE PORTFOLIO EXPENSES
The following table sets forth the estimated aggregate expenses of the
Portfolios, including expenses of the underlying Funds, based upon expenses
shown in the table above for each Portfolio and for each underlying Fund's Class
I shares, which are available only to the Portfolios. These estimates assume a
constant allocation by each Portfolio of its assets among the underlying Funds
identical to the actual allocation at October 31, 1998. A Portfolio's actual
expenses may be higher as a result of changes in the allocation of the
Portfolio's assets among the underlying Funds, the expenses of the underlying
Funds, and/or the Portfolio's own expenses.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Class A Shares Class B Shares
--------------------- -------------------------
Combined Combined
Expenses Expenses
Combined Without Combined Without
Net Waivers or Net Waivers or
PORTFOLIO Expenses Credits Expenses Credits
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Strategic Growth Portfolio(1) 1.96% 2.02% 2.71% 2.77%
- --------------------------------------------------------------------------------------------------------------
Conservative Growth Portfolio(2) 1.85 1.90 2.60 2.65
- --------------------------------------------------------------------------------------------------------------
Balanced Portfolio(3) 1.78 1.88 2.53 2.63
- --------------------------------------------------------------------------------------------------------------
Flexible Income Portfolio(4) 1.57 2.06 2.32 2.81
- --------------------------------------------------------------------------------------------------------------
Income Portfolio(5) 1.52 2.27 2.30 3.05
- --------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
(1) As of October 31, 1998, the assets of the Strategic Growth Portfolio were
allocated as follows: Money Market Fund 5%, Growth & Income Fund 41%, Growth
Fund 35%, and International Growth Fund 19%.
(2) As of October 31, 1998, the assets of the Conservative Growth Portfolio were
allocated as follows: Money Market Fund 15%, Growth & Income Fund 36%,
Growth Fund 25%, Emerging Growth Fund 5% and International Growth Fund 19%.
(3) As of October 31, 1998, the assets of the Balanced Portfolio were allocated
as follows: Money Market Fund 20%, U.S. Government Securities Fund 15%,
Growth & Income Fund 30%, Growth Fund 15%, International Growth Fund 18% and
other assets 2%.
(4) As of October 31, 1998, the assets of the Flexible Income Portfolio were
allocated as follows: Money Market Fund 33%, U.S. Government Securities Fund
24%, Income Fund 14%, Growth & Income Fund 20%, Growth Fund 5% and other
assets 4%.
(5) As of October 31, 1998, the assets of the Income Portfolio were allocated as
follows: Money Market Fund 14%, Short Term High Quality Bond Fund 10%, U.S.
Government Securities Fund 29%, Income Fund 33%, High Yield Fund 9% and
other assets 5%.
34
<PAGE> 36
DESCRIPTION OF THE FUNDS AND PORTFOLIOS
This section provides a more complete description of the principal investment
strategies and risks of each Fund and Portfolio. The "Common Investment
Practices" section that follows provides additional information about the
principal investment strategies of the Funds and identifies the Funds and
Portfolios that may engage in such practices to a significant extent. You can
find additional descriptions of the Funds' strategies and risks in the Statement
of Additional Information ("SAI"). Except for policies explicitly identified as
"fundamental" in this Prospectus or the SAI, the investment objectives and
investment policies set forth in this Prospectus and the SAI are not fundamental
and may be changed at any time without shareholder consent. Except as otherwise
indicated, all policies and limitations are considered at the time of purchase;
the sale of securities is not required in the event of a subsequent change in
valuation or other circumstances.
MONEY FUNDS
The Money Funds invest only in U.S. dollar-denominated short-term, money market
securities. They will only purchase obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities or securities that are, or have
issuers that are,
- - rated by at least two nationally recognized statistical rating organizations
("NRSROs"), such as Standard & Poor's ("S&P") or Moody's Investors Service,
Inc. ("Moody's"), in one of the two highest rating categories for short-term
debt securities,
- - rated in one of the two highest categories for short-term debt by the only
NRSRO that has issued a rating, or
- - if not so rated, are determined to be of comparable quality.
A description of the rating systems of S&P and Moody's is contained in Appendix
A to this Prospectus and in the SAI. At the time of investment, no security
purchased by a Money Fund (except U.S. Government Securities subject to
repurchase agreements and variable rate demand notes) will have a maturity
exceeding 397 days, and each Money Fund's average portfolio maturity will not
exceed 90 days. The Money Funds will attempt to maintain a stable net asset
value ("NAV") of $1.00, but there can be no assurance that any Money Fund will
be able to do so.
MONEY MARKET FUND. To accomplish its objective, the Money Market Fund invests
solely in money market instruments that are selected from the following six
general categories:
- - U.S. Government securities;
- - short-term commercial notes (including asset-backed securities) issued
directly by U.S. and foreign businesses, banking institutions, financial
institutions (including brokerage, finance and insurance companies) and state
and local governments and municipalities to finance short-term cash needs;
- - obligations of U.S. and foreign banks with assets of more than $500 million;
- - securities issued by foreign governments, their agencies or instrumentalities
or by supranational entities;
- - short-term corporate obligations rated in one of the two highest rating
categories by Moody's or S&P; and
- - repurchase agreements.
TAX-EXEMPT MONEY MARKET FUND. The Tax-Exempt Money Market Fund invests
primarily in a diversified selection of Municipal Obligations, the income from
which is exempt from federal income tax. These obligations include fixed income
obligations issued by states, counties, cities or other governmental bodies that
generate income exempt from federal income tax. Short-term Municipal Obligations
may include, but are not limited to, tax anticipation notes, bond anticipation
notes, revenue anticipation notes and project notes, or other forms of
short-term municipal loans and obligations. Under normal market conditions, the
Fund will not invest more than 20% of its assets in obligations that pay
interest subject to alternative minimum tax ("AMT-Subject Bonds").
For temporary defensive purposes, the Fund may invest more than 20% of its
assets in instruments eligible for purchase by the Money Market Fund, which may
produce income that is not exempt from federal income taxes.
The Fund may also invest in variable rate demand obligations, stand-by
commitments, when-issued securities and forward commitments.
CALIFORNIA MONEY FUND. To accomplish its objective, the California Money Fund
invests in a portfolio of
35
<PAGE> 37
Municipal Obligations. It is a fundamental policy of the Fund to invest, under
normal market conditions, at least 80% of its total assets in Municipal
Obligations. The Fund normally invests at least 80% of its total assets in
Municipal Obligations issued by the State of California and its political
subdivisions and certain other governmental issuers (such as the Commonwealth of
Puerto Rico), which produce income that is exempt from California state personal
income tax. The Fund may also invest in AMT-Subject Bonds.
The Fund may also invest in variable rate demand obligations, stand-by
commitments, when-issued securities and forward commitments.
For temporary defensive purposes, the Fund may invest more than 20% of its
assets in instruments eligible for purchase by the Money Market Fund, which may
produce income that is not exempt from federal income taxes or California
personal income tax.
FIXED-INCOME FUNDS
SHORT TERM HIGH QUALITY BOND FUND. Although the Short Term High Quality Bond
Fund maintains a dollar-weighted average portfolio maturity of three years or
less, it may hold individual securities with remaining maturities of more than
three years. For purposes of the weighted average maturity calculation, a
mortgage instrument's average life will be considered to be its maturity, and
the date on which the interest rate of a floating rate security can next change
will be used in place of its maturity date.
The Fund will invest substantially all of its assets in debt securities that, at
the time of purchase, are rated in one of the top four rating categories by one
or more NRSROs or, if unrated, are judged to be of comparable quality by the
Advisor ("investment grade" securities). All debt securities purchased by the
Fund will be investment grade at the time of purchase. Under normal market
conditions, the Fund will invest at least 65% of its total assets in U.S.
Government securities, corporate debt obligations or mortgage-related securities
rated in one of the two highest categories by an NRSRO or determined by the
Advisor to be of comparable quality.
The Fund may invest in obligations issued or guaranteed by domestic and foreign
governments and government agencies and instrumentalities and in high-grade
corporate debt obligations, such as bonds, debentures, notes, equipment lease
and trust certificates, mortgage-backed securities, collateralized mortgage
obligations and asset-backed securities.
The Fund may invest up to 10% of its assets in foreign fixed-income securities,
primarily bonds of foreign governments or their political subdivisions, foreign
companies and supranational organizations, including non-U.S. dollar-denominated
securities and U.S. dollar-denominated debt securities issued by foreign issuers
and foreign branches of U.S. banks. Investment in foreign securities is subject
to special risks. The Fund may invest up to 5% of its assets in preferred stock.
The Fund may engage in certain options transactions, enter into financial
futures contracts and related options for the purpose of portfolio hedging and
enter into currency forwards or futures contracts and related options for the
purpose of currency hedging. The Fund may invest in certain illiquid
investments, such as privately placed obligations, including restricted
securities. The Fund may invest up to 10% of its assets in securities of
unaffiliated mutual funds. The Fund may borrow money or enter into reverse
repurchase agreements or dollar roll transactions in the aggregate up to 33 1/3%
of its total assets. The Fund may invest up to 25% of its total assets in
asset-backed securities, which represent a participation in, or are secured by
and payable from, a stream of payments generated by particular assets, most
often a pool of similar assets.
TARGET MATURITY 2002 FUND. The Target Maturity 2002 Fund will invest at least
90% of its net assets in zero-coupon U.S. Treasury securities maturing during
2002. Generally, the Fund will endeavor to purchase those zero-coupon securities
that mature toward the end of 2002. Until the Fund's target maturity date,
December 31, 2002, the Fund may also invest up to 10% of its net assets in
coupon-bearing (income-producing) U.S. Treasury securities maturing on or before
that date and money market instruments. If the Advisor determines that the
desired zero-coupon securities are not otherwise readily available for purchase,
the Fund may invest in zero-coupon and income-producing U.S. Government
Securities maturing on or before December 31, 2002. The Fund may also invest in
cash and cash equivalents for temporary defensive purposes.
The market value of fixed-income securities held by the Fund and, consequently,
the Fund's NAV, can be expected to vary inversely to changes in prevailing
interest rates. Consequently, redemptions made prior
36
<PAGE> 38
to December 31, 2002 may result in substantial capital gains or losses.
To the extent that the Fund holds zero-coupon securities that mature prior to
December 31, 2002, the proceeds of these securities at their maturity will be
reinvested in short-term coupon-bearing U.S. Treasury securities or money market
instruments until that date. Therefore, towards the end of the target maturity
year, 2002, the percentage of the Fund's assets invested in coupon-bearing U.S.
Treasury securities and money market instruments may increase up to 100%. After
December 31, 2002, the Fund intends to remain open, with all its assets invested
in money market instruments and U.S. Treasury securities with maturities of up
to three years. The Fund will then be managed as a relatively short-term bond
fund and the normal risks of a bond fund will apply.
To approximate the return you would receive if you purchased zero-coupon
securities directly, the Advisor manages the Fund to track as closely as
possible the price behavior of zero-coupon securities maturing towards the end
of 2002. To correct for factors such as shareholder purchase and redemption
activity (and related transaction costs) that differentiate investing in a
portfolio of zero-coupon securities from investing directly in a zero-coupon
security, the Advisor executes portfolio transactions necessary to accommodate
net shareholder activity each business day.
By adhering to these investment parameters, the Advisor expects that if you hold
your shares and do not make any redemptions until December 31, 2002, and you
reinvest all dividends and capital gain distributions, you will realize a
maturity value that does not differ substantially from the anticipated value at
maturity, as calculated on the purchase date. There can be no assurance,
however, that these objectives will be achieved. Furthermore, if you do not
reinvest all dividends and capital gain distributions, then the AVM cannot be
estimated accurately.
The Fund's AVM is calculated by the Advisor each day the Fund is open for
business. It may vary from day-to-day due to redemptions and distributions, as
well as transaction costs, interest rate changes, and the Advisor's efforts to
improve total return by taking advantage of market opportunities.
Relatively few mutual funds with investment objectives and policies similar to
those of the Fund have reached their target maturity date. As a result, there is
relatively little experience regarding the types of risk involved in investing
in the Fund.
U.S. GOVERNMENT SECURITIES FUND. The U.S. Government Securities Fund invests
primarily in a selection of obligations of the U.S. Government and its agencies.
The Fund may also invest in collateralized mortgage obligations or repurchase
agreements which are secured by those types of obligations. It is a fundamental
policy of the Fund to invest only in the following types of securities: (1) U.S.
Government securities, including mortgage-backed securities; (2) obligations
secured by the full faith and credit of the U.S. Government or its
instrumentalities; and (3) collateralized mortgage obligations and repurchase
agreements which are secured by obligations identified in (1) and (2) above. The
Fund may borrow up to 5% of its total net assets for emergency, non-investment
purposes. The Fund may also enter into dollar roll transactions.
INCOME FUND. The Income Fund invests most of its assets in
- - debt and convertible debt securities;
- - U.S. Government securities, including mortgage-backed securities issued by the
Government National Mortgage Association ("GNMA"), Federal National Mortgage
Association ("FNMA"), and Federal Home Loan Mortgage Corporation ("FHLMC") or
similar government agencies;
- - obligations of U.S. banks that belong to the Federal Reserve System;
- - preferred stocks and convertible preferred stocks;
- - the highest grade commercial paper as rated by S&P or Moody's; and
- - deposits in U.S. banks.
The Fund may also invest in securities denominated in foreign currencies and
receive interest, dividends and sale proceeds in foreign currencies. The Fund
may engage in foreign currency exchange transactions for hedging purposes in
connection with the purchase and sale of foreign securities or to protect
against changes in the value of specific securities held by the Fund. It may
also purchase and sell currencies on a spot (cash) basis, enter into forward
contracts to purchase or sell foreign currencies at a future date, and buy and
sell foreign currency futures contracts. The Fund may borrow up to 5% of its
total net assets for emergency,
37
<PAGE> 39
non-investment purposes, and may enter into dollar roll transactions. The Fund
may purchase securities of issuers which deal in real estate or securities which
are secured by interests in real estate, and it may acquire and dispose of real
estate or interests in real estate acquired through the exercise of its rights
as a holder of debt obligations secured by real estate or interests therein. The
Fund may also purchase and sell interest rate futures and options. The Fund may
invest up to 35% of its assets in lower-rated fixed-income securities (sometimes
called "junk bonds").
HIGH YIELD FUND. The High Yield Fund invests, under normal market conditions,
at least 65% of its assets in a diversified portfolio of fixed income securities
(including debt securities, convertible securities and preferred stocks) rated
lower than BBB by S&P or Baa by Moody's or of equivalent quality as determined
by the Advisor. The remainder of the Fund's assets may be invested in any other
securities the Advisor believes are consistent with the Fund's objective. These
may include higher rated fixed-income securities, common stocks and other equity
securities. The Fund may also invest in securities of foreign issuers and engage
in hedging strategies involving options.
MUNICIPAL FUNDS
Each of the Municipal Funds and the California Money Fund, invests most of its
assets in Municipal Obligations. Current federal income tax laws limit the types
and volume of bonds qualifying for the federal income tax exemption of interest
which may affect the ability of a Fund to purchase sufficient amounts of
tax-exempt securities.
TAX-EXEMPT BOND FUND. The Tax-Exempt Bond Fund will invest at least 80% of its
assets in Municipal Obligations, including inverse floating rate obligations,
under normal market conditions.
The Fund specifically limits these investments to: municipal bonds, municipal
notes and securities of unaffiliated tax-exempt mutual funds. The Fund also may
invest up to 35% of its assets in lower-rated securities.
In adverse markets, the Fund may seek to protect its investment position by
investing up to 50% of its portfolio in taxable short-term investments such as:
- - U.S. Government securities;
- - commercial paper rated in the highest grade by either S&P or Moody's;
- - obligations of U.S. banks;
- - time or demand deposits in U.S. banks; and
- - repurchase agreements relating to municipal securities or any of the foregoing
taxable instruments.
Interest income from these investments that is distributed to you by the Fund
may be taxable.
The Fund may also purchase and sell interest rate futures and options. The Fund
may also invest in AMT-Subject Bonds, although, so long as its name includes the
words "tax-exempt" and the SEC so requires, those investments will be limited to
20% of the Fund's total assets.
CALIFORNIA MUNICIPAL FUND. The California Municipal Fund invests primarily in
intermediate- and long-term California municipal obligations which are Municipal
Obligations that generate interest which is exempt from California state
personal income tax. It is a fundamental policy of the Fund that, under normal
market conditions, at least 80% of its total assets will be invested in these
obligations. The Fund may also invest in AMT-Subject Bonds.
The Fund will invest primarily in investment grade Municipal Obligations. The
Fund may also invest in inverse floating rate obligations, which are generally
more volatile than other types of Municipal Obligations.
The Fund may, under normal circumstances, invest up to 20% of its assets in
- - Municipal Obligations that are not exempt from California personal income tax;
- - short-term Municipal Obligations;
- - taxable cash equivalents, including short-term U.S. Government securities,
certificates of deposit and bankers' acceptances, commercial paper rated
Prime-1 by Moody's or A-1+ or A-1 by S&P, repurchase agreements (collectively
"Short-Term Instruments"); and
38
<PAGE> 40
- - securities of money market mutual funds (subject to the limitations set forth
under "Common Investment Practices").
The Fund may, for temporary defensive purposes, invest in these securities
without limitation. Also, as a non-diversified investment company under the 1940
Act, the Fund may invest a larger portion of its assets in the securities of a
small number of issuers.
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND. The California Insured
Intermediate Municipal Fund will invest primarily in insured intermediate-term
California Municipal Obligations. It is a fundamental policy of the Fund that it
will invest at least 80% of the value of its total assets in Insured California
Municipal Obligations (except when maintaining a temporary defensive position).
Under normal market conditions, the dollar-weighted average maturity of the
securities in which the Fund invests will be more than three years but less than
ten years. The maximum effective maturity (the maturity date without regard to
call provisions, except that for pooled single family mortgage securities
effective maturity is the average life of the underlying mortgage obligations)
of any Municipal Obligation in which the Fund invests will be fifteen years.
All of the Municipal Obligations in which the Fund invests, taking into account
any insurance, are investment grade securities. For more information, see "About
Bond Insurance" below.
The Fund may invest without limitation in AMT-Subject Bonds.
Under normal market conditions, the Fund may invest up to 20% of its assets in
- - uninsured Municipal Obligations;
- - Municipal Obligations that are not exempt from California personal income tax;
and
- - short-term Municipal Obligations and taxable cash equivalents, including
Short-Term Instruments and securities of unaffiliated money market mutual
funds (subject to the limitations set forth under "Common Investment
Practices") and may, for temporary defensive purposes, invest in these
securities without limitation.
In addition, the Fund may invest in inverse floating rate obligations. The Fund
may engage in hedging transactions through the use of financial futures and
options thereon. It may also purchase and sell securities on a when-issued or
forward commitment basis, invest in mortgage-backed securities, enter into
repurchase agreements, invest in stand-by commitments and lend portfolio
securities. The Fund may invest in floating rate and variable rate obligations,
including participation interests therein (referred to collectively as "Hedging
Transactions").
FLORIDA INSURED MUNICIPAL FUND. The Florida Insured Municipal Fund will invest
primarily in insured, intermediate- and long-term Municipal Obligations issued
by the State of Florida and its political subdivisions. The Fund will invest
primarily in investment-grade Municipal Obligations. It is a fundamental policy
of the Fund that it will invest at least 80% of the value of its total assets
(except when maintaining a temporary defensive position) in insured Florida
Municipal Obligations. See "About Bond Insurance" below. The Fund may invest
without limitation in AMT-Subject Bonds. The Fund may also invest in inverse
floating rate obligations.
The Fund may invest up to 20% of its total assets in:
- - uninsured Municipal Obligations;
- - Municipal Obligations that are not exempt from Florida intangible personal
property tax; and
- - Short-Term Instruments and securities of unaffiliated money market mutual
funds and, for temporary defensive purposes, invest in these securities
without limitation.
Florida does not impose an income tax on individuals. Distributions of
investment income and capital gains by the Fund will be subject to Florida
corporate income taxes. Florida imposes a tax on intangible personal property
owned by Florida residents. Based on a ruling the Fund has received from the
Florida Department of Revenue, if the Fund's assets consist, on the last
business day of the calendar year, solely of assets exempt from Florida
intangible personal property tax, shares of the Fund owned by Florida residents
will be exempt from Florida intangible personal property tax. Assets exempt from
Florida intangible personal property tax include Florida Municipal Obligations;
obligations of the U. S. Government or its agencies; and cash.
ABOUT BOND INSURANCE. The insured Municipal Obligations in which the California
Insured Intermediate Municipal and Florida Insured Municipal Funds will invest
and the other Municipal Funds may invest are insured under insurance policies
that relate to the
39
<PAGE> 41
specific Municipal Obligation in question and that are issued by an insurer
having a claims-paying ability rated AAA by S&P or Aaa by Moody's. This
insurance is generally non-cancelable and will continue in force so long as the
Municipal Obligations are outstanding and the insurer remains in business.
The insured Municipal Obligations are insured as to the scheduled payment of all
installments of principal and interest as they fall due. The insurance covers
only credit risk and therefore does not guarantee the market value of the
obligations in a Fund's investment portfolio or a Fund's NAV. The Fund's NAV
will continue to fluctuate in response to fluctuations in interest rates. A
Fund's investment policy requiring investment in insured Municipal Obligations
will not affect the Fund's ability to hold its assets in cash or to invest in
escrow-secured and defeased bonds or in certain short-term tax-exempt
obligations, or affect its ability to invest in uninsured taxable obligations
for temporary or liquidity purposes or on a defensive basis.
EQUITY FUNDS
BOND & STOCK FUND. Under normal market conditions, at least 25% of the Bond &
Stock Fund's assets will be invested in fixed-income securities, including
preferred stocks and that portion of the value of convertible securities which
is not attributable to a conversion feature. The Fund may invest in money market
instruments for temporary or defensive purposes. The Fund may invest in
fixed-income securities of any maturity, including mortgage-backed securities,
U.S. Government securities and asset-backed securities, and may also invest up
to 35% of its assets, in below investment grade bonds (sometimes called junk
bonds). The Fund may purchase or sell U.S. Government securities or
collateralized mortgage obligations on "when-issued" or "delayed-delivery" basis
in an aggregate of up to 20% of the market value of its total net assets. The
Fund may invest up to 25% of its assets in real estate investment trusts, known
as "REITs." The Fund may write (sell) covered call options. The Fund may invest
up to 25% of its assets in U.S. dollar-denominated securities of foreign
issuers.
GROWTH & INCOME FUND. The Growth & Income Fund invests primarily in common
stocks. The Fund may also invest in money market instruments for temporary or
defensive purposes. To limit risk, repurchase agreements maturing in more than
seven days will not exceed 10% of the Fund's total assets. The Fund may invest
up to 25% of its assets in REITs. The Fund may invest in fixed-income securities
of any maturity, including mortgage-backed securities, and may invest up to 35%
of its assets in below investment grade fixed-income securities.
The Fund may purchase or sell U.S. Government securities or collateralized
mortgage obligations on a "when-issued" or "delayed-delivery" basis in an
aggregate up to 20% of the market value of its total assets minus total
liabilities (except for the obligations created by these commitments). The Fund
may write (sell) covered call options. The Fund may invest up to 25% of its
assets in U.S. dollar-denominated securities of foreign issuers.
NORTHWEST FUND. The Northwest Fund invests in common stocks of companies
located or doing business in the Northwest states of Alaska, Idaho, Montana,
Oregon and Washington. Under normal circumstances, at least 65% of the Fund's
total assets will be invested in companies whose principal executive offices are
located in one of those states.
The Fund is permitted to invest in money market instruments for temporary or
defensive purposes. The Fund may invest up to 25% of its assets in REITs, and
may write (sell) covered call options.
Because the Fund concentrates its investments in companies located or doing
business in the Northwest, the Fund is not intended as a complete investment
program, and could be adversely impacted by economic trends within the
five-state area.
GROWTH FUND. The Growth Fund invests primarily in common stocks believed to
have significant appreciation potential. The Fund also may invest in debt
securities, bonds, convertible bonds, preferred stock and convertible preferred
stock, including up to 35% of its assets in non-investment-grade debt
securities.
The Fund may invest up to 25% of its assets in foreign securities, usually
foreign common stocks, and up to 5% of its assets in securities of companies in
(or governments of) developing or emerging countries (sometimes referred to as
"emerging markets"). The Fund may also engage in certain options transactions,
enter into financial futures contracts and related options for the purpose of
portfolio hedging and enter into currency forwards or futures contracts and
related options for the purpose of currency hedging.
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<PAGE> 42
EMERGING GROWTH FUND. The Emerging Growth Fund invests primarily in equity
securities of companies with market capitalization of less than $1.4 billion at
the time of purchase. In addition to common stock, the Fund's equity securities
may include convertible bonds, convertible preferred stock and warrants to
purchase common stock, as well as cash and cash equivalents. The Fund may invest
up to 25% of its assets in securities of foreign issuers and up to 5% of its
assets in securities in developing or emerging countries. The Fund may invest up
to 35% of its assets in non-investment-grade debt securities ("junk bonds") if
the Advisor believes that doing so will be consistent with the goal of capital
appreciation.
INTERNATIONAL GROWTH FUND. The International Growth Fund invests primarily in
equity securities of issuers located in foreign countries that the Fund's
sub-advisor believes present attractive investment opportunities. Criteria for
determining the appropriate distribution of investments among various countries
and regions include prospects for relative economic growth, expected levels of
inflation, government policies influencing business conditions, the outlook for
currency relationships and the range of investment opportunities available to
international investors. The relative strength or weakness of a particular
country's currency or economy may dictate whether securities of issuers located
in such country will be purchased or sold. The Fund may invest without limit in
the securities of issuers located in any one country (except as provided below
with respect to emerging markets countries). The Fund will emphasize established
companies, although it may invest in companies of varying sizes as measured by
assets, sales and capitalization.
The Fund invests in common stock and may invest in other securities with equity
characteristics, such as trust or limited partnership interests, preferred
stock, rights and warrants. The Fund may also invest in convertible securities.
The Fund invests in securities listed on foreign or domestic securities
exchanges and securities traded in foreign or domestic over-the-counter markets,
and may invest in restricted or unlisted securities.
The Fund intends to stay fully invested in the securities described above to the
extent practical. Fund assets may be invested in short-term debt instruments to
meet anticipated day-to-day operating expenses, and for temporary defensive
purposes. In addition, when the Fund experiences large cash inflows, it may hold
short-term investments until desirable equity securities become available. These
short-term instruments are generally rated A or higher by Moody's or S&P, or, if
unrated, of comparable quality in the opinion of the Fund's sub-advisor.
The Fund may invest up to 30% of its assets in the securities of companies in or
governments of developing or emerging markets, provided that no more than 5% of
the Fund's total assets are invested in any one emerging markets country. For
temporary defensive purposes, the Fund may invest a major portion of its assets
in securities of U.S. issuers. Furthermore, the Fund may invest up to 5% of its
total assets in investment grade corporate debt securities having maturities
longer than one year, including Euro-currency instruments and securities.
STRATEGIC ASSET MANAGEMENT PORTFOLIOS
The Portfolios offer you the opportunity to pursue a variety of specially
constructed asset allocation strategies. The Portfolios are designed for
long-term investors seeking total return for tax-advantaged retirement and other
long-term investment or savings accounts.
In order to achieve its investment objective, each Portfolio typically allocates
its assets, within predetermined percentage ranges, among certain of the Funds.
Even so, the Portfolios may temporarily exceed one or more of the applicable
percentage limits for short periods. The percentages reflect the extent to which
each Portfolio will normally invest in the particular market segment represented
by each underlying Fund, and the varying degrees of potential investment risk
and reward represented by each Portfolio's investments in those market segments
and their corresponding Funds. The Advisor may alter these percentage ranges
when it deems appropriate. The assets of each Portfolio will be allocated among
the Funds in accordance with its investment objective, the Advisor's outlook for
the economy and the financial markets, and the relative market valuations of the
Funds.
In addition, in order to meet liquidity needs or for temporary defensive
purposes, each Portfolio may invest, without limit, directly in cash stock or
bond
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<PAGE> 43
index futures and options thereon and the following short-term instruments:
- - short-term obligations of the U.S. Government, its agencies,
instrumentalities, authorities or political subdivisions;
- - other short-term debt securities rated A or higher by Moody's or S&P, or if
unrated, of comparable quality in the opinion of the Advisor;
- - commercial paper, including master notes;
- - bank obligations, including negotiable certificates of deposit, time deposits
and bankers' acceptances; and
- - repurchase agreements.
At the time a Portfolio invests in any commercial paper, bank obligations or
repurchase agreements, the issuer must have outstanding debt rated A or higher
by Moody's or S&P; the issuer's parent corporation, if any, must have
outstanding commercial paper rated Prime-1 by Moody's or A-1 by S&P; or, if no
such ratings are available, the investment must be of comparable quality in the
opinion of the Advisor. In addition to purchasing shares of the Funds, a
Portfolio may use futures contracts and options in order to remain effectively
fully invested in proportions consistent with the Advisor's current asset
allocation strategy for the Portfolio. Specifically, each Portfolio may enter
into futures contracts and options thereon, provided that the aggregate deposits
required on these contracts do not exceed 5% of the Portfolio's total assets. A
Portfolio may also use futures contracts and options for bona fide hedging
transactions. Futures contracts and options may also be used to reallocate the
Portfolio's assets among asset categories while minimizing transaction costs, to
maintain cash reserves while simulating full investment, to facilitate trading,
to seek higher investment returns, or to simulate full investment when a futures
contract is priced attractively or is otherwise considered more advantageous
than the underlying security or index. As a fundamental policy, which may not be
changed without shareholder vote, each Portfolio will concentrate its
investments in shares of the Funds.
COMMON INVESTMENT PRACTICES
The next several pages contain more detailed information about types of
securities in which the Funds may invest, and strategies which the Advisor or
the respective sub-advisor may employ in pursuit of that Fund's investment
objective and a summary of risks and restrictions associated with these
securities and investment practices. For more information, see the SAI.
BORROWING. The Funds may borrow money from banks solely for temporary or
emergency purposes, subject to various limitations. If a Fund borrows money, its
share price may be subject to greater fluctuation until the borrowing is paid
off. For the California Money, Short Term High Quality Bond, Target Maturity
2002, California Municipal, California Insured Intermediate Municipal, Florida
Insured Municipal, Growth, International Growth and Emerging Growth Funds, and
for the Portfolios, such borrowings may not exceed 30% of total assets. The
Money Market, Tax-Exempt Money Market, U.S. Government Securities, Income, High
Yield, Tax-Exempt Bond, Bond & Stock, Growth & Income and Northwest Funds may
borrow up to 5% of their total assets for emergency purposes. In addition, the
Money Market and Tax-Exempt Money Market Funds may borrow up to one-third of
their total assets to meet redemption requests. The Short Term High Quality Bond
Fund is prohibited from borrowing money or entering into reverse repurchase
agreements or dollar roll transactions (described below) in the aggregate in
excess of one-third of the Fund's total assets (after giving effect to such
borrowings and transactions). If a Fund makes additional leverage investments
while borrowings are outstanding, this will have the effect of leveraging the
Fund. The California Money, Short Term High Quality Bond, Target Maturity 2002,
California Municipal, California Insured Intermediate Municipal, Florida Insured
Municipal, Growth, International Growth and Emerging Growth Funds and the
Portfolios may not purchase additional securities when borrowings, including
reverse repurchase agreements, for each of these except the Short Term High
Quality Bond Fund, exceed 5% of total assets. Leveraging will magnify declines
as well as increases in the NAV of a Fund's or Portfolio's shares and in the
yield on a Fund's or Portfolio's investments. Each of the foregoing percentage
limitations on borrowings is a fundamental policy of the respective Funds and
Portfolios.
The Income, Short Term High Quality Bond and U.S. Government Securities Funds
may enter into DOLLAR ROLLS. A Fund enters into a DOLLAR ROLL by selling
securities for delivery in the current month and simultaneously contracting to
repurchase, typically in
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<PAGE> 44
30 or 60 days, substantially similar (same type, coupon and maturity) securities
on a specified future date. Under the Investment Company Act of 1940, as amended
(the "1940 Act"), this may be considered borrowing from the counterparty and may
produce similar leveraging effects. The proceeds of the initial sale of
securities in the dollar roll transactions, for example, may be used to purchase
long-term securities which will be held during the roll period. To the extent
that the proceeds of the initial sale of securities are invested in bonds, the
Fund will be subject to market risk on those bonds as well as similar risk with
respect to the securities the Fund is required to repurchase.
Each of the Short Term High Quality Bond, California Municipal, California
Insured Intermediate Municipal, Florida Insured Municipal, Growth, International
Growth and Emerging Growth Funds may engage in REVERSE REPURCHASE AGREEMENTS.
Reverse repurchase agreements involve the risk that the market value of the
securities sold by a Fund may decline below the repurchase price of the
securities and, if the proceeds from the reverse repurchase agreement are
invested in securities, that the market value of the securities bought may
decline at the same time there is decline in the securities sold (and required
to be repurchased).
FIXED-INCOME SECURITIES. The market value of fixed-income securities held by a
Fund and, consequently, the value of the Fund's shares can be expected to vary
inversely to changes in prevailing interest rates. You should recognize that, in
periods of declining interest rates, the Fund's yield will tend to be somewhat
higher than prevailing market rates and, in periods of rising interest rates,
the Fund's yield will tend to be somewhat lower. Also, when interest rates are
falling, any net inflow of money to the Fund will likely be invested in
instruments producing lower yields than the balance of its assets, thereby
reducing current yield. In periods of rising interest rates, the opposite can be
expected to occur. The prices of longer maturity securities are also subject to
greater market fluctuations as a result of changes in interest rates. In
addition, obligations purchased by a Fund may be subject to the risk of default.
Fixed-Income securities, including Municipal Obligations, rated in the lower end
of the investment-grade category (Baa or BBB) may have speculative
characteristics and may be more sensitive to economic changes and changes in the
financial condition of their issuers.
The fixed-income securities in which the Funds may invest include ZERO-COUPON
SECURITIES, which make no payments of interest or principal until maturity.
Because these securities avoid the need to make current interest payments, they
may involve greater credit risks than other fixed-income securities.
FLOATING RATE, INVERSE FLOATING RATE AND VARIABLE RATE INVESTMENTS. The
Municipal Funds, the Fixed-Income Funds and the Growth & Income Fund may
purchase floating rate, inverse floating rate and variable rate obligations,
including participation interests therein and assignments thereof.
The Money Funds may purchase floating rate and variable rate obligations,
including participation interests therein.
The Fixed-Income Funds may purchase mortgage-backed securities that are floating
rate, inverse floating rate and variable rate obligations. Municipal Obligations
purchased by the Municipal Funds may include floating rate, inverse floating
rate and variable rate obligations, including variable rate demand notes issued
by industrial development authorities and other governmental entities, as well
as participation interests therein. Although variable rate demand notes are
frequently not rated by credit rating agencies, a Fund may purchase unrated
notes that are determined by the Advisor or the Fund's sub-advisor to be of
comparable quality at the time of purchase to rated instruments that may be
purchased by the Fund. The absence of an active secondary market could make it
difficult for a Fund to dispose of these securities in the event the issuer of
the note were to default on its payment obligations, and the Fund could, for
this or other reasons, suffer a loss as a result of the default.
Each Fund may also invest in securities representing interests in tax-exempt
securities, known as inverse floating obligations or "residual interest bonds,"
which pay interest rates that vary inversely with changes in the interest rates
of specified short-term tax-exempt securities or an index of short-term
tax-exempt securities. The interest rates on inverse floating-rate obligations
or residual interest bonds will typically decline as short-term market interest
rates increase and increase as short-term market rates decline. These securities
have the effect of providing a degree of investment leverage. They will
generally respond to changes in market interest rates more rapidly than
fixed-rate long-term securities (typically twice as fast). As a result, the
market values of inverse floating-rate obligations
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<PAGE> 45
and residual interest bonds will generally be more volatile than the market
values of fixed-rate tax-exempt securities.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS AND CURRENCY MANAGEMENT. The Equity
Funds and Fixed-Income Funds (with the exception of the Target Maturity 2002,
U.S. Government Securities, Bond & Stock, Growth & Income and Northwest Funds)
may, subject to the investment limitations stated elsewhere in this Prospectus
and the SAI, engage in foreign currency exchange transactions. Funds that buy
and sell securities denominated in currencies other than the U.S. dollar, and
receive interest, dividends and sale proceeds in currencies other than the U.S.
dollar, may enter into foreign currency exchange transactions to convert to and
from different foreign currencies and to convert foreign currencies to and from
the U.S. dollar. These Funds either enter into these transactions on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market, or use forward contracts to purchase or sell foreign currencies.
These Funds also may enter into foreign currency hedging transactions in an
attempt to protect against changes in foreign currency exchange rates between
the trade and settlement dates of specific securities transactions or changes in
foreign currency exchange rates that would adversely affect a portfolio position
or an anticipated portfolio position. These transactions tend to limit any
potential gain that might be realized should the value of the hedged currency
increase. The precise matching of the forward contract amounts and the value of
the securities involved will not generally be possible because the future value
of these securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward contract
is entered into and the date it matures. The projection of currency market
movements is extremely difficult, and the successful execution of a hedging
strategy is highly uncertain. In addition, when the Advisor or a Fund's
sub-advisor believes that the currency of a specific country may deteriorate
against another currency, it may enter into a forward contract to sell the less
attractive currency and buy the more attractive one. The amount in question
could be less than or equal to the value of the Fund's securities denominated in
the less attractive currency. The Fund may also enter into a forward contract to
sell a currency which is linked to a currency or currencies in which some or all
of the Fund's portfolio securities are or could be denominated, and to buy U.S.
dollars. These practices are referred to as "cross hedging" and "proxy hedging."
Forward currency exchange contracts are agreements to exchange one currency for
another - for example, to exchange a certain amount of U.S. dollars for a
certain amount of Japanese yen - at a future date and specified price. Because
there is a risk of loss to the Fund if the other party does not complete the
transaction, the Advisor or the Fund's sub-advisor will enter into forward
currency exchange contracts only with parties approved by the Trusts' Board of
Trustees or persons acting pursuant to their direction.
Each of the Funds other than the Money Funds (with the exception of the Target
Maturity 2002, U.S. Government Securities Bond & Stock, Growth & Income and
Northwest Funds) may invest in securities which are indexed to certain specific
foreign currency exchange rates. These securities expose you to the risk of
significant changes in rates of exchange between the U.S. dollar and any foreign
currency to which an exchange rate-related security is linked. In addition,
there is no assurance that sufficient trading interest to create a liquid
secondary market will exist for a particular exchange rate-related security due
to conditions in the debt and foreign currency markets. Illiquidity in the
forward foreign exchange market and the high volatility of the foreign exchange
market may from time to time combine to make it difficult to sell an exchange
rate-related security prior to maturity without incurring a significant loss.
While the foregoing actions are intended to protect the Fund from adverse
currency movements, there is a risk that currency movements involved will not be
properly anticipated, and there can be no assurance that such transactions will
be available or that the Funds will use such transactions even if they are
available. Use of currency hedging techniques may also be limited by the need to
protect the status of the Fund as a regulated investment company under the
Internal Revenue Code of 1986, as amended (the "Code").
FOREIGN INVESTMENTS. The Money Market, Bond & Stock, Growth & Income and
Northwest Funds may invest in securities of foreign issuers if such securities
are denominated in U.S. dollars. The High Yield, Income, Short Term High Quality
Bond, Emerging Growth, Growth and International Growth Funds may invest in both
U.S. dollar denominated and non-U.S. dollar denominated foreign securities.
There are
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<PAGE> 46
certain risks involved in investing in foreign securities, including those
resulting from
- - fluctuations in currency exchange rates,
- - devaluation of currencies,
- - future political or economic developments and the possible imposition of
currency exchange blockages or other foreign governmental laws or
restrictions,
- - reduced availability of public information concerning issuers, and
- - the fact that foreign companies are not generally subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to domestic
companies.
Moreover, securities of many foreign companies may be less liquid and their
prices more volatile than those of securities of comparable domestic companies.
In addition, there is the possibility of expropriation, nationalization,
confiscatory taxation and limitations on the use or removal of funds or other
assets of the Funds, including the withholding of dividends. The risks
associated with foreign securities are generally greater for securities of
issuers in emerging markets.
In addition, while the volume of transactions effected on foreign stock
exchanges has increased in recent years, in most cases it remains well below
that of the New York Stock Exchange. Accordingly, the Funds' foreign investments
may be less liquid and their prices may be more volatile than comparable
investments in securities of U.S. companies. Moreover, the settlement periods
for foreign securities, which are often longer than those for securities of U.S.
issuers, may affect portfolio liquidity. In buying and selling securities on
foreign exchanges, the Funds normally pay fixed commissions that are generally
higher than the negotiated commissions charged in the United States. In
addition, there is generally less governmental supervision and regulation of
securities exchanges, brokers and issuers in foreign countries than in the
United States. Foreign securities generally are denominated and pay dividends or
interest in foreign currencies, and the value of the Funds' net assets as
measured in U.S. dollars will be affected favorably or unfavorably by changes in
exchange rates.
The Equity Funds, the Short Term High Quality Bond Fund, the Income Fund and the
High Yield Fund may invest in securities of foreign issuers directly or in the
form of AMERICAN DEPOSITARY RECEIPTS ("ADRs"), EUROPEAN DEPOSITARY RECEIPTS
("EDRs"), GLOBAL DEPOSITARY RECEIPTS ("GDRs") or other similar securities
representing securities of foreign issuers. These securities may not be
denominated in the same currency as the securities they represent. ADRs are
receipts typically issued by a United States bank or trust company evidencing
ownership of the underlying foreign securities. EDRs, which are sometimes
referred to as Continental Depositary Receipts ("CDRs"), are receipts issued by
a European financial institution evidencing a similar arrangement. Generally,
ADRs, in registered form, are designed for use in the United States securities
markets, and EDRs, in bearer form, are designed for use in European securities
markets.
GEOGRAPHIC CONCENTRATION. Potential investors in the Northwest Fund, the
Municipal Funds (other than the Tax-Exempt Bond Fund) and the California Money
Fund should consider the possibly greater risk arising from the geographic
concentration of their investments, as well as the current and past financial
condition of California and Florida municipal issuers in the case of the
Municipal Funds. In addition to factors affecting the state or regional economy,
certain California and Florida constitutional amendments, legislative measures,
executive orders, administrative regulations, court decisions and voter
initiatives could result in certain adverse consequences affecting California
and Florida municipal obligations, respectively. See the SAI for a more detailed
description of these risks.
HOLDINGS IN OTHER INVESTMENT COMPANIES. When the Advisor or a Fund's
sub-advisor believes that it would be beneficial to the Fund, each of the
Tax-Exempt Money Market, California Money, California Insured Intermediate
Municipal, California Municipal, Florida Insured Municipal, Short Term High
Quality Bond, Tax-Exempt Bond, Emerging Growth, Growth and International Growth
Funds may invest up to 10% of its assets in securities of mutual funds that are
not affiliated with the Advisor or the Fund's sub-advisor. As a shareholder in
any such mutual fund, the Fund will bear its ratable share of the mutual fund's
expenses, including management fees, and will remain subject to the Fund's
advisory and administration fees with respect to the assets so invested. In
addition, the Growth Fund may invest Fund assets in money market funds
affiliated with Janus (its sub-advisor), provided that Janus remits to the Fund
the amount of any
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<PAGE> 47
investment advisory and administrative services fees paid to Janus as the
investment manager of the money market fund.
ILLIQUID SECURITIES AND RESTRICTED SECURITIES. Up to 10% of the net assets of
each Money Fund and up to 15% of the net assets of every other Fund may be
invested in securities that are not readily marketable. Such illiquid securities
may include:
- - repurchase agreements with maturities greater than seven calendar days;
- - time deposits maturing in more than seven calendar days;
- - to the extent a liquid secondary market does not exist for the instruments,
futures contracts and options thereon;
- - certain over-the-counter options, as described in the SAI;
- - certain variable rate demand notes having a demand period of more than seven
days; and
- - securities the disposition of which is restricted under federal securities
laws (excluding certain Rule 144A securities, as described below).
Securities which may be resold pursuant to Rule 144A under the Securities Act of
1933, as amended, will not be included for the purposes of these restrictions,
so long as such securities meet liquidity guideline established by the Trusts'
Board of Trustees.
Each of the Funds may purchase RESTRICTED SECURITIES (provided such securities
are, in the case of the Money Market, Tax-Exempt Money Market, Income, U.S.
Government Securities, Tax-Exempt Bond, Bond & Stock, Growth & Income and
Northwest Funds, eligible for resale pursuant to Rule 144A under the Securities
Act of 1933, as amended). Although recent and ongoing developments in the
securities markets have resulted in greater trading of restricted securities,
making restricted securities, in many instances, more liquid than they once were
considered to be, investing in restricted securities could increase the level of
illiquidity of the portfolio securities of a Fund. This could make it more
difficult for a Fund to fulfill shareholder redemption orders on a timely basis.
If a Fund were required to sell these securities on short notice, it might be
unable to obtain fair market value.
LENDING OF SECURITIES. The California Money, California Insured Intermediate
Municipal, Short Term High Quality Bond, Emerging Growth, Growth and
International Growth Funds each may lend portfolio securities up to 20% of total
assets to brokers and other financial organizations. The Bond & Stock, Growth &
Income and Northwest Funds may lend portfolio securities up to 33% of total
assets. These transactions involve a risk of loss to the Fund if the
counterparty should fail to return such securities to the Fund upon demand.
LOWER-RATED SECURITIES. The Income, Tax-Exempt Bond, Bond & Stock, Emerging
Growth, Growth & Income and Growth Funds may each invest up to 35% of their
total assets in non-investment grade debt securities, sometimes referred to as
"junk bonds." The High Yield Fund may invest all of its assets in these
securities, and will generally invest at least 65% of its assets in them.
Non-investment-grade debt securities usually entail greater risk (including the
possibility of default or bankruptcy of the issuers), generally involve greater
price volatility and risk of principal and income, and may be less liquid than
higher-rated securities. Both price volatility and illiquidity may make it
difficult for a Fund to value or to sell certain of these securities under
certain market conditions. These securities are often considered to be
speculative and involve greater risk of default or price changes due to changes
in the issuer's creditworthiness. The market prices of these securities may
fluctuate more than higher-rated securities and may decline significantly in
periods of general economic difficulty, which may follow periods of rising
interest rates. For further information, see Appendix A to this Prospectus.
The following table shows, for each indicated Fund, the average percentage of
its total assets that was invested during the past fiscal year in securities
assigned to the various rating categories by S&P, or if unrated by S&P, assigned
to comparable rating categories by another NRSRO, and in unrated securities
determined by the Advisor to be of comparable quality:
<TABLE>
<CAPTION>
Income Tax-Exempt Bond & Stock
S&P RATING Fund Bond Fund Fund
- -----------------------------------------------------------------
<S> <C> <C> <C>
AAA (or US Treasury)....... 13 38 66
AA......................... 3 26 0
A.......................... 25 16 8
BBB........................ 44 14 22
BB......................... 4 2 4
B.......................... 4 1 0
Not Rated.................. 6 3 0
</TABLE>
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MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. The California Insured
Intermediate Municipal, California Municipal, Florida Insured Municipal, Short
Term High Quality Bond, U.S. Government Securities, Emerging Growth and
International Growth Funds may invest in GOVERNMENT STRIPPED MORTGAGE-BACKED
SECURITIES issued or guaranteed by GNMA, FNMA or FHLMC. These securities
represent beneficial ownership interests in either periodic principal
distributions (PRINCIPAL-ONLY SECURITIES or "PO strips") or interest
distributions (INTEREST-ONLY SECURITIES or "IO strips") on mortgage-backed
certificates issued by GNMA, FNMA or FHLMC, as the case may be. The mortgages
backing GNMA certificates include conventional 30-year fixed-rate mortgages,
15-year fixed-rate mortgages, graduated payment mortgages, and adjustable-rate
mortgages.
The U.S. Government guarantees the timely payment of interest and principal for
these securities. However, the guarantees do not extend to the securities' yield
or value, which are likely to vary inversely with fluctuations in interest
rates. Also, the guarantees do not extend to the yield or value of the Fund's
shares. Investing in government stripped mortgage-backed securities involves the
risks normally associated with investing in mortgage-backed securities issued by
government or government-related entities. In addition, the yields on PO and IO
strips are extremely sensitive to prepayments on the underlying PO and IO
strips, mortgage loans. If a decline in the level of prevailing interest rates
results in a higher than anticipated rate of principal prepayment, distributions
of principal will be accelerated, thereby reducing the yield to maturity on IO
strips and increasing the yield to maturity on PO strips. Conversely, if an
increase in the level of prevailing interest rates results in a rate of
principal prepayments lower than anticipated, distributions of principal will be
deferred, thereby increasing the yield to maturity on IO strips and decreasing
the yield to maturity on PO strips. Sufficiently high prepayment rates could
result in the Fund losing some or all of its initial investment in an IO strip.
The Funds will acquire government stripped mortgage-backed securities only if a
liquid secondary market for the securities exists at the time of acquisition.
However, there can be no assurance that the Funds will be able to effect a trade
of a government stripped mortgage-backed security at a time when it wishes to do
so.
In addition, the Income, Bond & Stock and Growth & Income Funds may invest in
commercial mortgage-backed securities, which are similar to those securities,
except that they are not issued or guaranteed by governmental entities.
Commercial mortgage-backed securities include collateralized mortgage
obligations and real estate mortgage investment conduits ("REMICs"). While
commercial mortgage-backed securities are generally structured with one or more
types of credit enhancement, they typically lack a guarantee by an entity having
the credit status of a governmental agency or instrumentality.
To the extent that a Fund purchases mortgage-backed securities at a premium,
mortgage foreclosures and payments and prepayments of principal (which may be
made at any time without penalty) will tend to result in the loss of that
premium. The yield of a Fund may be affected by reinvestment of prepayments at
higher or lower rates than the original investment. In addition, like other debt
securities, the value of mortgage-related securities, including government and
government-related mortgage pools, will generally fluctuate in response to
market interest rates.
The Money Market, Tax-Exempt Money Market, Short Term High Quality Bond, Bond &
Stock, Emerging Growth and High Yield Funds may purchase asset-backed
securities. These Funds will not invest more than 10% of their total assets in
asset-backed securities, except that the Short Term High Quality Bond Fund may
invest up to 25% of its total assets in such securities. Asset-backed securities
are structured like mortgage-backed securities, but instead of mortgage loans or
interests in mortgage loans, the underlying assets may include such items as
motor vehicle installment sales or installment loan contracts, leases of various
types of real and personal property, including home equity loans, and
receivables from credit card agreements. The ability of an issuer of
asset-backed securities to enforce its security interest in the underlying
assets may be limited.
MUNICIPAL OBLIGATIONS, LEASES AND AMT-SUBJECT BONDS. The two principal
classifications of municipal bonds are "general obligation" and "revenue" bonds.
General obligation bonds are secured by the issuer's pledge of its full faith
and credit, with either limited or unlimited taxing power for the payment of
principal and interest. Revenue bonds are not supported by the issuer's full
taxing authority. Generally, they are payable only from the revenues of a
particular facility,
47
<PAGE> 49
a class of facilities, or the proceeds of another specific revenue source.
The Tax-Exempt Money Market, California Money and California Insured
Intermediate Municipal Funds may acquire participations in lease obligations or
installment purchase contract obligations (collectively, "lease obligations") of
municipal authorities or entities. Lease obligations do not constitute general
obligations of the municipality for which the municipality's taxing power is
pledged. Certain of these lease obligations contain "non-appropriation" clauses,
which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated for
such purpose on a yearly basis. In addition to the "non-appropriation" risk,
these securities represent a relatively new type of financing that has not yet
developed the depth of marketability associated with more conventional bonds. In
the case of a "non-appropriation" lease, the Fund's ability to recover under the
lease in the event of non-appropriation or default will be limited solely to the
repossession of the leased property, and in any event, foreclosure of that
property might prove difficult.
"AMT-Subject Bonds" are Municipal Obligations issued to finance certain "private
activities," such as bonds used to finance airports, housing projects, student
loan programs and water and sewer projects. Interest on AMT-Subject Bonds is a
specific tax preference item for purposes of the federal individual and
corporate alternative minimum taxes. See "Dividends, Capital Gains and Taxes"
for a discussion of the tax consequences of investing in AMT-Subject Bonds.
Current federal income tax laws limit the types and volume of bonds qualifying
for the federal income tax exemption of interest, which may have an effect upon
the ability of the Fund to purchase sufficient amounts of tax-exempt securities.
REAL ESTATE INVESTMENT TRUSTS. The Income, Bond & Stock, Growth & Income and
Northwest Funds may invest in real estate investment trusts, known as "REITs."
REITs involve certain unique risks in addition to those risks associated with
investing in the real estate industry in general (such as possible declines in
the value of real estate, lack of availability of mortgage funds or extended
vacancies of property). Equity REITs may be affected by changes in the value of
the underlying property owned by the REITs, while mortgage REITs may be affected
by the quality of any credit extended. REITs are dependent upon management
skills, are not diversified, are subject to heavy cash flow dependency, risks of
default by borrowers, and self-liquidation. REITs are also subject to the
possibilities of failing to qualify for tax-free pass-through of income under
the Code, and failing to maintain their exemptions from registration under the
1940 Act.
Investment in REITs involves risks similar to those associated with investing in
small capitalization companies. REITs may have limited financial resources, may
trade less frequently and in a limited volume and may be subject to more abrupt
or erratic price movements than larger company securities.
REPURCHASE AGREEMENTS. All of the Funds may invest in repurchase agreements,
which are purchases of underlying debt obligations from financial institutions,
such as banks and broker-dealers, subject to the seller's agreement to
repurchase the obligations at an established time and price. Repurchase
agreements can be regarded as loans to the seller, collateralized by the
securities that are the subject of the agreement. Default by the seller would
expose the Fund to possible loss because of adverse market action or delay in
connection with the disposition of the underlying obligations. In addition, if
bankruptcy proceedings are commenced with respect to the seller of the
obligations, the Fund may be delayed or limited in its ability to sell the
collateral. The Tax-Exempt Money Market and California Money Funds' investments
in repurchase agreements are limited by their restrictions on investment in
taxable instruments. Pursuant to an exemptive order granted by the SEC, the
Funds may transfer daily uninvested cash balances into one or more joint trading
accounts. Assets in the joint trading accounts are invested in money market
instruments, and the proceeds are allocated to the participating funds on a pro
rata basis.
STAND-BY COMMITMENTS. The California Money, Tax-Exempt Money Market and the
Municipal Funds may acquire "stand-by commitments" with respect to Municipal
Obligations held in their portfolios. Under a stand-by commitment, a dealer
agrees to purchase, at a Fund's option, specified Municipal Obligations at a
specified price. A Fund may pay for stand-by commitments either separately in
cash or by paying a higher price for the securities acquired with the
commitment, thus increasing the cost of the securities and reducing the yield
otherwise available from them. The Funds
48
<PAGE> 50
will acquire stand-by commitments solely to facilitate portfolio liquidity and
do not intend to exercise their rights thereunder for trading purposes.
STRATEGIC TRANSACTIONS. Subject to the investment limitations and restrictions
stated elsewhere in this Prospectus and the SAI, each of the Funds and
Portfolios except the Money Funds may utilize various investment strategies as
described below to hedge various market risks, to manage the effective maturity
or duration of fixed-income securities or for other bona fide hedging purposes.
Utilizing these investment strategies, the Fund or Portfolio may purchase and
sell, exchange-listed and over-the-counter put and call options on securities,
equity and fixed-income indices and other financial instruments. It may also
purchase and sell financial futures contracts and options thereon, enter into
various interest rate transactions such as swaps, caps, floors or collars, and
enter into various currency transactions such as currency forward contracts,
currency futures contracts, currency swaps or options on currencies or currency
futures. The Funds may write (sell) covered call options as well. A call option
is "covered" if the Fund owns the security underlying the option it has written
or it maintains enough cash, cash equivalents or liquid securities to purchase
the underlying security. All the above are collectively referred to as
"Strategic Transactions."
Strategic Transactions may be used
- - to attempt to protect against possible changes in the market value of
securities held in, or to be purchased for, the Fund's portfolio resulting
from securities markets or currency exchange rate fluctuations,
- - to protect the Fund's unrealized gains in the value of its portfolio
securities,
- - to facilitate the sale of such securities for investment purposes,
- - to manage the effective maturity or duration of the Fund's portfolio, or
- - to establish a position in the derivatives markets as a temporary substitute
for purchasing or selling particular securities.
Some Strategic Transactions may also be used to seek potentially higher returns.
Any or all of these investment techniques may be used at any time, as the use of
any Strategic Transaction is a function of numerous variables including market
conditions.
The use of Strategic Transactions involves special considerations and risks; for
example,
- - the ability of the Fund to utilize Strategic Transactions successfully will
depend on the ability of the Advisor or the sub-advisor to predict pertinent
market movements,
- - the risk that the other party to a Strategic Transaction will fail to meet its
obligations to the Fund,
- - the risk that the Fund will be unable to close out a Strategic Transaction at
a time when it would otherwise do so, due to the illiquidity of the Strategic
Transaction and
- - the risk of imperfect correlation, or even no correlation, between price
movements of Strategic Transactions and price movements of the related
portfolio positions.
Strategic Transactions can reduce opportunity for gain by offsetting the
positive effect of favorable price movements in the related portfolio positions.
U.S. GOVERNMENT SECURITIES. All of the Funds may invest in U.S. Government
Securities, which include direct obligations of the U.S. Treasury (such as U.S.
Treasury bills, notes and bonds) and obligations issued or guaranteed by U.S.
Government agencies or instrumentalities. Some obligations issued or guaranteed
by agencies or instrumentalities of the U.S. Government are backed by the full
faith and credit of the U.S. Government (such as GNMA bonds), others are backed
only by the right of the issuer to borrow from the U.S. Treasury (such as
securities of Federal Home Loan Banks) and still others are backed only by the
credit of the instrumentality (such as FNMA and FHLMC bonds).
WHEN-ISSUED SECURITIES, FORWARD COMMITMENTS AND DELAYED-DELIVERY
TRANSACTIONS. In order to secure yields or prices deemed advantageous at the
time, the Funds (with the exception of the Money Funds and the Target Maturity
2002 Fund) may purchase or sell securities on a when-issued or a
delayed-delivery basis. The Funds will enter into a when-issued transactions
only for the purpose of acquiring portfolio securities. Due to fluctuations in
the value of securities purchased on a when-issued or a delayed-delivery basis,
the yields obtained on such securities may be higher or lower than the yields
available in the market on the dates when the securities are actually delivered
to the Fund. Similarly, the sale of securities for delayed-
49
<PAGE> 51
delivery can involve the risk that the prices available in the market when
delivery is made may actually be higher than those obtained in the transaction
itself. The California Money Fund and the Municipal Funds may purchase Municipal
Obligations offered on a "forward commitment" basis.
When-issued Municipal Obligations may include bonds purchased on a "when, as and
if issued" basis, under which the issuance of the securities depends on the
occurrence of a subsequent event, such as approval of a proposed financing by
appropriate municipal authorities. No when-issued or forward commitments will be
made by the California Money Fund or any Municipal Fund if, as a result, more
than 20% of the value of the Fund's total assets would be committed to such
transactions. A significant commitment of a Fund's assets to the purchase of
securities on a "when, as and if issued" basis may increase the volatility of
the Fund's NAV.
YEAR 2000. Many computer software systems in use today cannot properly process
date-related information from and after January 1, 2000. Should any of the
computer systems employed by the Fund's or Portfolio's major service providers
fail to process this type of information properly, that could have a negative
impact on the Fund's or Portfolio's operations and the services that are
provided to the Fund's or Portfolio's shareholders. The Advisor and Shareholder
Services have advised the Funds and Portfolios that they are reviewing all of
their computer systems with the goal of modifying or replacing such systems
prior to January 1, 2000 to the extent necessary to avoid any such negative
impact. In addition, the Advisor has been advised by the Custodian that it is
also in the process of reviewing its systems with the same goal. As of the date
of this prospectus, the Funds and Portfolios and the Advisor have no reason to
believe that these goals will not be achieved. Similarly, the values of certain
of the Funds' or Portfolio's assets may be adversely affected by the inability
of their issues or third parties to properly process date-related information
from and after January 1, 2000.
PORTFOLIO TRANSACTIONS AND TURNOVER. Each Fund's turnover rate varies from year
to year, depending on market conditions and investment strategies. High turnover
rates increase transaction costs and may increase taxable capital gains.
Historical portfolio turnover rates for each Fund are shown under "Financial
Highlights" below. The Advisor and the sub-advisors will not consider portfolio
turnover rate to be a limiting factor in making investment decisions consistent
with the Funds' investment objectives and policies.
50
<PAGE> 52
WAYS TO SET UP YOUR ACCOUNT
+ Individual or Joint Account
Individual accounts are owned by one person. Two types of joint accounts
(having two or more owners) can be opened:
1) in a "joint tenancy" account, the surviving owner(s) automatically
receive(s) the shares of any owner(s) who die(s); and
2) in a "tenants in common" account, the heir(s) of any deceased owner
receive(s) such owner's shares, rather than the surviving owners of the joint
account.
+ Retirement
Retirement plans protect investment income and capital gains from current
taxes. Contributions to these accounts may be tax deductible. Retirement
accounts require special applications and typically have lower minimums.
- INDIVIDUAL RETIREMENT ACCOUNTS ("IRAS") If you are of legal age and under
70 1/2 years old with Adjusted Gross Income ("AGI") of less than $40,000
(or $60,000 if married and filing jointly) you may protect up to $2,000
(subject to certain limitations for single persons with AGI equal to or
greater than $30,000 and married persons who file jointly with AGI equal to
or greater than $50,000) per tax year from certain tax effects. If your
spouse does not work, you can protect up to an additional $2,000 per year
in your spouse's name.
- ROTH IRAS If you are of legal age with AGI not exceeding $110,000 (or
$160,000 if married and filing jointly) you may protect up to $2,000 on a
non-deductible basis (subject to certain limitations for single persons
with AGI equal to or greater than $95,000 and married persons who file
jointly with AGI equal to or greater than $150,000) per tax year from
certain tax effects.
- ROLLOVER IRAS You may transfer money from certain employer-sponsored
retirement plans and keep your tax benefits (often happens when you change
employers).
- SIMPLIFIED EMPLOYEE PENSION PLANS ("SEP-IRAS") If you own a small business
or are self-employed, you and your eligible employees could get many of the
same advantages as a Keogh, but with fewer administrative requirements.
+ Gifts or Transfers to a Minor Child
("UGMA" or "UTMA")
You can give money to a child and obtain certain tax benefits. A parent or
grandparent can give up to $10,000 a year to each child or grandchild without
paying federal gift tax. Depending on state laws, you can set up a custodial
account under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers
to Minors Act (UTMA).
+ Trust
You can use a Trust for many purposes, including charitable contributions and
providing a regular income for a child until a certain age. The trust must be
established before an account can be opened.
+ Corporation or Other Organization
Corporations, associations, partnerships, institutions, or other groups may
invest for many purposes.
51
<PAGE> 53
HOW CAN I INVEST IN THE FUNDS
AND PORTFOLIOS?
<TABLE>
<CAPTION>
TO OPEN AN ACCOUNT: TO ADD TO AN ACCOUNT:
(MINIMUM $1,000*) (MINIMUM $50**)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
+ By Phone -- 800-222-5852 Exchange from another Fund or Exchange from another Fund or
Portfolio account with the same Portfolio account with the same
registration, including name, registration, including name,
address, and taxpayer ID number address, and taxpayer ID number.
(social security number for an
individual). Call WM Shareholder Services at
800-222-5852
Call WM Shareholder Services at
800-222-5852. (5:00 a.m. to 6:00
p.m., Pacific Time/8:00 a.m. to
9:00 p.m., Eastern Time, Monday
through Friday and 6:00 a.m. to
3:00 p.m., Pacific Time/9:00 a.m.
to 6:00 p.m., Eastern Time, on
Saturdays)
- ------------------------------------------------------------------------------------------------------------------
+ By Mail Complete and sign the application. Make your check payable to The WM
Make your check or negotiable bank Group of Funds. Indicate your
draft payable to The WM Group of account number on your check.
Funds. Third-party checks are not Include the "next investment" stub
accepted.*** from your previous account
statement. Mail the check and stub
Mail the completed application to the address printed on your
form and check to: account statement.***
THE WM GROUP OF FUNDS Exchange by mail: call
P.O. BOX 9757 800-222-5852 for instructions
PROVIDENCE, RI 02940-9757
- ------------------------------------------------------------------------------------------------------------------
+ By Wire 1) Telephone WM Shareholder Ser- Instruct your bank/financial
vices for an application form and institution to wire Federal Funds
instructions. as described at left under
2) Instruct your bank to wire paragraph 2.
Federal Funds exactly as follows:
BOSTON SAFE DEPOSIT AND TRUST
BOSTON, MA
ABA# 011-001234
FOR CREDIT TO:
THE WM GROUP OF FUNDS
ACCOUNT #167053
(FUND NAME AND CLASS OF SHARES)
(CUSTOMER'S NAME)
(CUSTOMER'S SOCIAL SECURITY
NUMBER)
3) Mail the completed application
form to:
THE WM GROUP OF FUNDS
P.O. BOX 9757
PROVIDENCE, RI 02940-9757
</TABLE>
52
<PAGE> 54
HOW CAN I INVEST IN THE FUNDS
AND PORTFOLIOS? (CONT.)
<TABLE>
<CAPTION>
TO OPEN AN ACCOUNT: TO ADD TO AN ACCOUNT:
(MINIMUM $1,000*) (MINIMUM $50**)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
+ Systematic 1) Obtain and complete an Pre-authorized periodic
application form. investments will be processed
(Minimum New Account amount automatically. (Minimum Amount
$50+) 2) Attach a voided check or $25++)***
deposit slip from the bank account
you would like the investments
transferred from and indicate
either the day of the week or
day(s) of the month when the
purchase would occur.
3) Mail the application to the
address listed above.***
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
* $10,000 for the Portfolios and $2,000 for IRA accounts investing in the
Portfolios.
** $100 for the Portfolios.
*** Investments paid by check, negotiable bank draft or by Automated Clearing
House transfer may not be available for redemption for up to 15 days after
purchase. See page 60 for additional information.
+ $1,000 for the Portfolios.
++ $100 for the Portfolios.
53
<PAGE> 55
WHICH CLASS OF SHARES IS BEST FOR ME?
This prospectus offers you a choice of two classes of fund shares: Class A and
Class B. The next several pages will expand upon the "Fees and Expenses" section
above to help you determine which class of shares is best for you. This will
depend upon a number of factors, including the amount you plan to invest and how
long you plan to hold your shares.
CLASS A SHARES
The offering price for Class A shares of the Non-Money Funds is the NAV next
calculated after receipt of a properly completed purchase order, plus an initial
sales charge as shown in the table below. Sales charges may be reduced or waived
as discussed following the table. The final column in each table indicates what
dealers receive for selling Class A shares.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
+ Fixed-Income Funds
(other than Short Term High Quality Bond
and Target Maturity 2002 Funds)
+ Municipal Funds
+ Income and Flexible Income
Portfolios
------------------------------------------------------------------------------------
REALLOWED
SALES CHARGE TO DEALERS
------------------------------------------------------------------------------------
Percentage Percentage of Percentage
of Offering Net Amount of Offering
Purchase of Class A Shares Price Invested Price
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $50,000 4.50% 4.71% 4.00%
------------------------------------------------------------------------------------
$50,000 to $100,000 4.00 4.17 3.50
------------------------------------------------------------------------------------
$100,000 to $250,000 3.50 3.63 3.00
------------------------------------------------------------------------------------
$250,000 to $500,000 2.50 2.56 2.00
------------------------------------------------------------------------------------
$500,000 to $1,000,000 2.00 2.04 1.75
------------------------------------------------------------------------------------
$1,000,000 and above* .00 .00 .00
------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
<CAPTION>
- --- -----------------------------------------------------
+ Equity Funds
Strategic Growth,
Conservative Growth and
Balanced Portfolios
-------------------------------------------------
REALLOWED
SALES CHARGE TO DEALERS
-------------------------------------------------
Percentage Percentage of Percentage
of Offering Net Amount of Offering
Price Invested Price
-------------------------------------------------
<S> <C> <C> <C> <C> <C>
5.50% 5.82% 4.75%
------------------------------------------------------------------------------------
4.75 4.99 4.00
------------------------------------------------------------------------------------
3.75 3.90 3.00
------------------------------------------------------------------------------------
3.00 3.09 2.50
------------------------------------------------------------------------------------
2.00 2.04 1.75
------------------------------------------------------------------------------------
.00 .00 .00
------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
+ Short Term High Quality
Bond Fund
------------------------------------------------------------------------------------
REALLOWED
SALES CHARGE TO DEALERS
------------------------------------------------------------------------------------
Percentage Percentage of Percentage
of Offering Net Amount of Offering
Purchase of Class A Shares Price Invested Price
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $50,000 3.50% 3.63% 3.00%
------------------------------------------------------------------------------------
$50,000 to $100,000 3.00 3.09 2.50
------------------------------------------------------------------------------------
$100,000 to $250,000 2.50 2.56 2.00
------------------------------------------------------------------------------------
$250,000 to $500,000 2.25 2.30 2.00
------------------------------------------------------------------------------------
$500,000 to $1,000,000 2.00 2.04 1.75
------------------------------------------------------------------------------------
$1,000,000 and above* .00 .00 .00
------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
<CAPTION>
- --- -----------------------------------------------------
+ Target Maturity
2002 Fund
-------------------------------------------------
REALLOWED
SALES CHARGE TO DEALERS
-------------------------------------------------
Percentage Percentage of Percentage
of Offering Net Amount of Offering
Price Invested Price
-------------------------------------------------
<S> <C> <C> <C> <C> <C>
2.00% 2.04% 1.75%
------------------------------------------------------------------------------------
1.50 1.52 1.25
------------------------------------------------------------------------------------
1.00 1.01 0.75
------------------------------------------------------------------------------------
1.00 1.01 0.75
------------------------------------------------------------------------------------
0.50 0.50 0.50
------------------------------------------------------------------------------------
.00 .00 .00
------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>
* See "net asset value purchases" below.
Example: An investor considers putting $1,000 into an Equity Fund's Class A
shares. Based on the first column in the above table, 5.50% of the $1,000 would
pay for a sales charge. The charge would be $55.00, which is 5.82% of the net
investment of $945.00, as the next column shows. The dealer selling the shares
would be paid $47.50 of the $55.00, which is 4.75% of $1,000, as the last column
shows.
54
<PAGE> 56
CUMULATIVE DISCOUNT. This allows your current purchases to qualify for the
foregoing discounts by including the value of shares of the Funds and Portfolios
that were purchased subject to an initial or contingent deferred sales charge.
The discount will be based on current market value. Individuals, immediate
family members and trustees purchasing for single fiduciary accounts are
eligible for this discount.
LETTER OF INTENT. This discount is for purchases made over an extended period.
It provides you with a cumulative discount on the same basis as explained in the
previous paragraph if the following conditions are met: Purchases of Class A
shares must be made within a 13-month period that begins no earlier than 90 days
before the submission of a letter of intent from the investor to the Funds. For
more information about this discount, please contact Shareholder Services or
your Investment Representative.
REINVESTMENT. You can reinvest redemption proceeds of Class A shares that were
subject to a sales charge when first purchased in other Class A shares within
120 days without incurring another initial sales charge. You can also reinvest
any redemption proceeds of Class B shares that were subject to a contingent
deferred sales charge in Class A shares within 120 days without incurring an
initial sales charge.
NET ASSET VALUE PURCHASES. There is no initial sales charge on Class A
purchases of $1 million or more, but such purchases are generally subject to a
contingent deferred sales charge of 1.00% if you redeem them during the first
year after purchase or .50% if you redeem them during the second year after
purchase.
Qualified employee benefit plans (including SEPs and SIMPLEs) that have more
than 100 participants or that have more than $500,000 invested in the Funds and
Portfolios may purchase shares without an initial sales charge. However, a
contingent deferred sales charge of 1% may be imposed on the amount that was
invested through such a plan in Class A shares and that is redeemed (1) if,
within the first two years after the plan's initial investment in the Funds or
Portfolios, the named fiduciary of the plan withdraws the plan from investing in
the Funds and Portfolios in a manner that causes all shares held by the plan's
participants to be redeemed; or (2) by a plan participant within two years of
the plan participant's purchase of such Class A shares. The contingent deferred
sales charge will be waived on redemptions in connection with certain
involuntary distributions, including distributions arising out of the death or
post-purchase disability of a shareholder (including one who owns the shares as
joint tenant).
Class A shares may be purchased at net asset value, and in any amount, by
officers, directors and employees of the Advisor or its affiliates, or companies
which have entered into selling agreements with the Distributor, and to certain
family members of such individuals. The purchase must be for investment purposes
only and may not be resold other than through redemption by the Fund or
Portfolio. The Funds and Portfolios may also offer their shares at net asset
value to certain retirement plans; to investors who purchase shares with the
proceeds of redemptions of shares of other mutual funds advised by WM Advisors
or its affiliates within five business days of such redemptions; and to brokers,
dealers or registered investment advisors who have entered into arrangements
with the Distributor providing specifically for the shares to be used in
particular investment products made available to their clients for which they
may charge a separate fee. No sales charge will be assessed on a purchase by any
other investment company in connection with the combination of such company with
the Trust by merger, acquisition of assets or otherwise. The Distributor will
pay authorized dealers commissions on certain net asset value purchases as
described in the SAI.
EACH FUND AND PORTFOLIO RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES OF
ANY CLASS OF ANY FUND OR PORTFOLIO AT ANY TIME. Each Fund and Portfolio also
reserves the right to reject any specific purchase order, including purchases by
exchange.
CONSULT AN INVESTMENT REPRESENTATIVE OR SEE THE SAI IF YOU THINK YOU MAY QUALIFY
FOR ANY OF THESE PURCHASE PLANS. YOU MUST NOTIFY THE FUND OR PORTFOLIO AT THE
TIME OF PURCHASE WHENEVER A REDUCED SALES CHARGE OR NET ASSET VALUE PURCHASE
APPLIES.
CLASS B SHARES
Class B shares are offered at the NAV next calculated after receipt of a
properly completed purchase order, without an initial sales charge. The entire
amount of the purchase price is invested in the Fund selected. However, Class B
shares have higher distribution and service fees than Class A shares for eight
years. Also, if you redeem Class B shares within five years of purchase (four
years in the case of Class B shares of
55
<PAGE> 57
the Short Term High Quality Bond Fund), you generally must pay a contingent
deferred sales charge.
The proceeds from any contingent deferred sales charges are paid to the
Distributor to defray expenses for providing distribution services for Class B
shares. Examples of such expenses include compensation to salespeople and
selected dealers. The Distributor currently pays authorized dealers commissions
of 4.00% of the price of Class B shares sold by them (3.00% for Class B shares
of the Short Term High Quality Bond Fund).
CONTINGENT DEFERRED SALES CHARGE. Class B shares redeemed within five years of
purchase are subject to a contingent deferred sales charge according to the
following schedule. Class B shares purchased by exchange will be subject to a
contingent deferred sales charge using the schedule of the Fund originally
purchased. Shares purchased through reinvestment of dividends or capital gain
distributions are not subject to a contingent deferred sales charge.
Class B shares of all Funds (except for the Short Term High Quality Bond Fund)
and Class B shares of all Portfolios:
<TABLE>
<CAPTION>
YEAR OF
REDEMPTION Contingent
AFTER PURCHASE Deferred Sales Charge
- -------------------------------------------------------------------
<S> <C>
First....................................... 5.00%
Second...................................... 4.00%
Third....................................... 3.00%
Fourth...................................... 2.00%
Fifth....................................... 1.00%
Sixth and following......................... 0.00%
</TABLE>
Class B shares of the Short Term High Quality Bond Fund:
<TABLE>
<CAPTION>
YEAR OF
REDEMPTION Contingent
AFTER PURCHASE Deferred Sales Charge
- -------------------------------------------------------------------
<S> <C>
First..................................... 4.00%
Second.................................... 3.00%
Third..................................... 2.00%
Fourth.................................... 1.00%
Fifth and following....................... 0.00%
</TABLE>
Class B shares of certain Funds purchased prior to March 20, 1998, may be
subject to a different contingent deferred sales charge schedule, as described
in the SAI.
The contingent deferred sales charge is calculated by applying the above
percentages to the lesser of (1) the NAV of the redeemed shares at the time they
were purchased or (2) the NAV of the redeemed shares at the time of redemption.
This means that no contingent deferred sales charge will be charged on any NAV
increases above the initial purchase price. Shares are redeemed in the order
that results in the lowest possible rate being charged. Accordingly, they will
be redeemed first from shares purchased through reinvested dividends or capital
gain distributions and then in the order of purchase.
Here is an example:
An investor purchases 100 Class B shares at $10 per share -- for a total cost of
$1,000. In the second year after the purchase, the NAV has risen to $12 per
share, and the investor has acquired 10 more shares through dividend
reinvestment.
At that time, the investor decides to make the first redemption. The transaction
includes 50 shares at $12 per share -- for a total of $600.
The first 10 shares to be redeemed will not be subject to any charge because of
the 10 shares received from dividend reinvestment.
As for the other 40 shares, the charge will be applied only to the original cost
of $10 per share. The NAV increase of $2 per share will not be considered. As a
result, $400 of the redemption proceeds (40 X $10) will be charged a rate of 4%,
which is the second-year rate shown in the table above. The resulting sales
charge will be 4% X $400, which will be $16.
The contingent deferred sales charge may be waived for redemptions of Class B
shares under these circumstances:
- - Following the death or post-purchase disability of a shareholder, as defined
in Section 72(m)(7) of the Code;
- - In connection with distributions from an IRA or other retirement plan made to
shareholders over age 59 1/2 (70 1/2 in the case of Class B shares of certain
Funds purchased prior to March 20, 1998 as described in the SAI);
- - According to a systematic withdrawal plan -- but limited to 12% annually of
the value of the Fund at the time the systematic withdrawal plan is
established; and
- - In connection with the liquidation by the Fund or Portfolio of a shareholder's
account as described under "How to Sell Shares."
YOU MUST NOTIFY THE FUND OR PORTFOLIO WHENEVER YOU ARE ENTITLED TO A WAIVER OR
REIMBURSEMENT OF CDSC.
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<PAGE> 58
CONVERSION FEATURE. Class B shares that remain outstanding for eight years will
generally convert to Class A shares of the same Fund or Portfolio based on the
relative NAVs at the time of conversion.
DISTRIBUTION PLANS
Each of the Funds (other than the Target Maturity 2002 Fund, which offers only
Class A shares) has adopted distribution plans, pursuant to Rule 12b-1 under the
1940 Act, applicable to Class A and Class B and shares of the Fund (each, a
"Rule 12b-1 Plan"), respectively. The Target Maturity 2002 Fund has adopted a
12b-1 Plan applicable to its Class A shares. Under the applicable Rule 12b-1
Plans, WM Funds Distributor, Inc., referred to as the Distributor in this
Prospectus, receives a service fee at an annual rate of 0.25% of the average
daily net assets of each class. In addition, the Distributor is paid a fee as
compensation in connection with the offering and sale of Class B shares at an
annual rate of 0.75% of the average daily net assets of such shares.
The Distributor may, from time to time, pay to other dealers, in connection with
retail sales or the distribution of shares of a Fund or Portfolio, material
compensation in the form of merchandise or trips. Salespersons, including
representatives of WM Financial Services, Inc. (a subsidiary of Washington
Mutual), and any other person entitled to receive any compensation for selling
or servicing Fund or Portfolio shares may receive different compensation with
respect to one particular class of shares over another, and may receive
additional compensation or other incentives for selling Fund or Portfolio
shares.
DISTRIBUTION OF INCOME AND CAPITAL GAINS
The Funds and Portfolios distribute dividends from net investment income (which
is essentially interest and dividends from securities held), minus expenses.
They also make capital gain distributions if realized gains from the sale of
securities exceed realized losses. The amount of dividends of net investment
income and distributions of net realized long- and short-term capital gains
payable to shareholders will be determined separately for each Fund or
Portfolio. Dividends from the net investment income of the Money, Fixed-Income
and Municipal Funds and the Balanced, Flexible Income and Income Portfolios will
normally be declared daily and paid monthly. Dividends from the net investment
income of the Bond & Stock and Growth & Income Funds and the Conservative Growth
Portfolio will normally be declared and paid quarterly. Dividends from the net
investment income of the Growth Fund and the Strategic Growth Portfolio will
normally be declared and paid semiannually. Dividends from the net investment
income of the Northwest, Emerging Growth and International Growth Funds will
normally be declared and paid annually. Except as otherwise specified, the Funds
and Portfolios distribute capital gains, if any, at least annually, normally in
December.
You have three choices regarding what you do with dividends and capital gain
distributions. You can make your choice at the time of your initial purchase or
by contacting the Funds' offices or your investment representative. The options
include:
AUTOMATIC REINVESTMENT. This procedure is automatically effective unless you
choose another option. All dividends and capital gain distributions are
reinvested into additional shares of the Fund or Portfolio.
REINVEST DIVIDENDS IN ANOTHER FUND OR PORTFOLIO. Income dividends may be
automatically invested in the same class of shares of another Fund or Portfolio,
provided that Fund or Portfolio is available for sale in your state of
residence.
CASH PAYMENT OF ALL DISTRIBUTIONS. All dividends and capital gain distributions
are deposited to your pre-authorized bank account or paid by check.
Reinvestments of income dividends and capital gain distributions are made at the
closing NAV on the day dividends or distributions are deducted from the Fund's
assets.
If you've chosen to receive dividends or capital gain distributions in cash and
your check is returned as undeliverable, the Funds and Portfolios reserve the
right (but are not obligated) to reinvest your check at the then-current NAV and
to automatically reinvest subsequent dividends and capital gain distributions in
your account. The Funds and Portfolios may also automatically reinvest dividends
or distributions of $10 or less.
HOW CAN I SELL SHARES?
You may redeem shares at any time in the following ways. The price paid per
share will be the NAV next calculated after receipt of a properly completed
redemption request (less any applicable CDSC).
57
<PAGE> 59
TELEPHONE. You may authorize telephone transactions on your account
application. Provided you have pre-authorized these transactions, you may redeem
or exchange shares by telephoning 800-222-5852. You may also request these
transactions through your investment representative. Proceeds may be directed to
a pre-authorized bank or broker account or to the address of record for the
account. Exchanges also may be made by telephone.
It may be difficult to reach the Trusts' offices by telephone during periods of
unusual economic or market activity. Please be persistent if this occurs. The
Funds' and Portfolios' transfer agent is committed to extending its 5:00 a.m. to
6:00 p.m. Pacific time business hours during such periods.
WRITTEN REQUEST. You may also sell shares by writing the Trusts' offices.
Written requests may require a signature guarantee, as discussed below, and the
return of any outstanding share certificates. Changes in pre-authorized
redemption instructions or your account registration may also require signature
guarantees. For your protection, the signature(s) must be guaranteed by an
eligible guarantor institutions which includes banks, credit unions, broker
dealers, national securities exchanges, savings institutions as well as
medallion signature guarantee.
PROMPT PAYMENT. Payment normally will be made on the next business day after
redemption, but no later than seven days after the transaction, unless you
recently purchased Fund shares by check or Automated Clearing House transfer. In
that case, redemption proceeds may be delayed for up to 15 days after the
purchase transaction, to allow for the collection of funds. Redemption proceeds
will be sent by check or Automated Clearing House transfer to your bank account
without charge. Wire redemption proceeds may be subject to a $10 fee. The
receiving bank also may charge a fee.
SYSTEMATIC WITHDRAWAL PLAN. Shareholders may choose to receive specific cash
withdrawals on a periodic basis. A $5,000 minimum balance in the applicable Fund
or $10,000 in the applicable Portfolio is required to establish a systematic
withdrawal plan (the minimum balance requirement is waived for IRA accounts).
Shares of the Fund or Portfolio will be redeemed to provide the requested
payment. Naturally, withdrawals that continually exceed dividend income and
capital gains will eventually exhaust the account. Class B shareholders may use
a systematic withdrawal plan to redeem up to 12% of the Fund balance annually,
without incurring a contingent deferred sales charge. The beginning balance is
the Fund balance at the time the systematic withdrawal plan is established.
OTHER CONSIDERATIONS. It is costly to maintain small accounts. Accordingly, an
account may be closed after 90 days' written notice if the total account value
falls below a minimum (currently $7,000 for the Portfolios and $700 for the
Funds or, in the case of an IRA account, $500 for the Portfolios and $300 for
the Funds) when any transfer or redemption is made. Shares will be redeemed at
the next calculated NAV, less any applicable CDSC, on the day the account is
closed. To prevent an account closure, you may purchase shares to bring your
account balance above the minimum during the 90-day grace period.
IRAS AND OTHER TAX-SHELTERED RETIREMENT PLANS
Shares of the Funds or Portfolios may be appropriate for many retirement plans,
including IRAs. Retirement plan contributions are tax deductible in some cases,
and earnings compound on a tax-deferred basis until withdrawn.
Information about IRAs and other qualified retirement plans is available from
the Trusts' offices or your Investment Representative.
HOW CAN I EXCHANGE MY SHARES?
You may exchange shares of any of the Funds or Portfolios for shares of the same
class of any other of the Funds or Portfolios. Exchanges of shares are sales and
may result in a gain or loss for income tax purposes.
Exchanges are made at the relative NAVs of the shares being exchanged. No
additional sales charge will be incurred when exchanging shares from a Fund
which imposes an initial or contingent deferred sales charge. Any contingent
deferred sales charge on the subsequent sale of shares acquired by exchange will
be based on the contingent deferred sales charge schedule of the Fund from which
the shares were initially purchased. Shares exchanged from a Money Fund will be
subject to the acquired Fund's sales charge unless the shares given in exchange
were previously exchanged from a Fund that imposes an initial or contingent
deferred sales charge.
58
<PAGE> 60
All exchanges are subject to the minimum investment requirements of the Fund or
Portfolio being acquired and to its availability for sale in your state of
residence. You may arrange for automatic monthly exchanges. The Funds and
Portfolios reserve the right to refuse any order for the purchase of shares,
including those by exchange. In particular, a pattern of exchanges that
coincides with a "market timing" strategy may be disruptive to a Fund or
Portfolio and, consequently, may be disallowed.
DIVIDENDS, CAPITAL GAINS AND TAXES
Each Fund and Portfolio will distribute substantially all of its net investment
income and net realized capital gain on a current basis.
You are responsible for federal income tax (and state and local income taxes, if
applicable) on dividends and capital gain distributions. This is true whether
such dividends or distributions are paid in cash or reinvested in additional
shares.
Generally, dividends paid by the Funds and Portfolios from interest, dividends
or net short-term capital gains will be taxed as ordinary income. Distributions
designated by the Fund or Portfolio as deriving from net gains on securities
held for more than one year are taxable as such (generally at a 20% tax rate),
regardless of how long you have held your shares.
A dividend or distribution made shortly after the purchase of shares of a Fund
or Portfolio by a shareholder, although in effect a return of capital to that
particular shareholder, would be taxable to him or her as described above.
Because of tax law requirements, you must provide the Trusts an accurate and
certified taxpayer identification number (for individuals, a Social Security
number) to avoid the 31% "back-up" withholding tax.
Early in each calendar year each Fund and Portfolio will notify you of the
amount and tax status of distributions paid to you for the preceding year.
A Portfolio's use of a fund-of-funds structure could affect the amount, timing
and character of distributions to shareholders. See "Taxes" in the Statement of
Additional Information.
Any gain resulting from the sale or exchange of your shares will generally also
be subject to tax. You should consult your tax advisor for more information on
your own tax situation, including possible foreign, state and local taxes.
ADDITIONAL CONSIDERATIONS FOR SHAREHOLDERS OF THE MUNICIPAL FUNDS, THE
TAX-EXEMPT MONEY MARKET FUND, AND THE CALIFORNIA MONEY MARKET
FUND. Distributions designated as "exempt-interest dividends" by any of the
Municipal Funds, the Tax-Exempt Money Market Fund or the California Money Market
Fund are not generally subject to federal income tax. However, if you receive
social security or railroad retirement benefits, you should consult your tax
adviser to determine what effect, if any, an investment in the fund may have on
the federal taxation of your benefits. In addition, an investment in the Fund
may result in liability for federal alternative minimum tax, both for individual
and corporate shareholders.
ADDITIONAL CONSIDERATIONS FOR SHAREHOLDERS OF THE FLORIDA INSURED MUNICIPAL
FUND. It is expected that shares of the Florida Insured Municipal Fund held by
a Florida resident will be exempt from the Florida intangible personal property
tax and that a portion of the dividends paid by the California Money Fund,
California Municipal Fund and the California Insured Intermediate Municipal Fund
will be exempt from California State personal income tax, but not from
California State franchise tax or California State corporate income tax.
Corporate taxpayers should consult their tax advisor concerning the Florida and
California state tax treatment of investments in these funds.
ADDITIONAL CONSIDERATIONS FOR SHAREHOLDERS OF THE INTERNATIONAL GROWTH
FUND. The International Growth Fund's investments in foreign securities may be
subject to foreign withholding taxes. In that case, the Fund's yield on those
securities would be decreased. Shareholders may be entitled to claim a credit or
deduction with respect to foreign taxes. In addition, the Fund's investments in
foreign securities or foreign currencies may increase or accelerate the Fund's
recognition of ordinary income and may affect the timing or amount of the Fund's
distributions.
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT A COMPLETE DESCRIPTION OF
THE FEDERAL, STATE OR LOCAL TAX CONSEQUENCES OF INVESTING IN THE FUNDS OR
PORTFOLIOS. YOU SHOULD CONSULT YOUR TAX ADVISOR BEFORE INVESTING IN THE FUNDS OR
PORTFOLIOS.
59
<PAGE> 61
ORGANIZATION
HOW NAV IS DETERMINED
Investment securities and other assets are valued primarily on the basis of
market quotations or, if quotations are not readily available, by a method that
the Board of Trustees believes accurately reflects fair value. Foreign
securities are valued on the basis of quotations from the primary market in
which they are traded, and are translated from the local currency into U.S.
dollars using current exchange rates. As a result, changes in the value of those
currencies in relation to the U.S. dollar may affect the Funds' NAV. Because
foreign markets may be open at different times than the New York Stock Exchange,
the value of the Funds' shares may change on days when shareholders are not able
to buy or sell them. If events materially affecting the values of the Funds'
foreign investments occur between the closed foreign markets and the close of
regular trading on the New York Stock Exchange, those investments may be valued
at their fair value. The NAVs are determined at the end of each business day of
the New York Stock Exchange or at 1:00 p.m. Pacific time, whichever is earlier.
ADVISOR AND SUB-ADVISORS
The Funds and Portfolios are managed by WM Advisors, Inc., which is referred to
as the Advisor in this Prospectus. The Advisor's address is 1201 Third Avenue,
22nd Floor, Seattle, Washington 98101. The Advisor has delegated portfolio
management responsibilities in respect of the Growth, International Growth,
California Municipal, Florida Insured Municipal, California Insured Intermediate
Municipal and Tax-Exempt Bond Funds to a sub-advisor. Each Fund and Portfolio
may, to the extent permitted under the 1940 Act, place portfolio transactions
with (and pay brokerage commissions to) affiliates of the Advisor and the
sub-advisors to the Funds indicated below. For more information see the SAI.
The Advisor has been in the business of investment management since 1944. Its
responsibilities include formulating each Fund's and Portfolio's investment
policies (subject to the terms of this Prospectus), analyzing economic trends,
directing and evaluating the investment services provided by the sub-advisors
and monitoring each Fund's or Portfolio's investment performance and reporting
to the Board of Trustees, as well as providing certain administrative services
to the Funds and Portfolios. In connection with its service as investment
advisor to each Fund and Portfolio, the Advisor may engage one or more
sub-advisors to provide investment advisory services to any of the Funds or
Portfolios and may change or eliminate any such sub-advisor if it deems such
action to be in the best interests of a Fund or Portfolio and its shareholders.
Where the Advisor has not delegated such duties to a sub-advisor, it is
responsible for managing the investment and reinvestment of the Fund's or
Portfolio's assets. The Advisor is an indirect wholly owned subsidiary of
Washington Mutual, Inc. ("Washington Mutual"), a publicly owned financial
services company.
The following organizations, under the supervision of the Advisor, act as
sub-advisors to the Funds indicated below, and are responsible for continuously
reviewing, supervising and administering such Funds' respective investment
programs:
JANUS, 100 Fillmore Street, Denver, Colorado 80206, acts as sub-advisor to the
Growth Fund. Janus is an indirectly majority owned subsidiary of Kansas City
Southern Industries, Inc., a publicly traded holding company whose primary
subsidiaries are engaged in transportation, information processing and financial
services. Janus has been providing investment advice to mutual funds or other
large institutional clients since 1970. As of March 27, 1998, Janus' assets
under management were in excess of $67.8 billion.
VAN KAMPEN, One Parkview Plaza, Oakbrook, Illinois 60181, acts as sub-advisor to
the California Municipal, California Insured Intermediate Municipal, Florida
Insured Municipal Funds and Tax-Exempt Bond Funds. Van Kampen is an indirect
wholly owned subsidiary of Morgan Stanley, Dean Witter, Discover & Co., a
publicly held global financial services company. Van Kampen provides investment
advice to a wide variety of individual, institutional and investment company
clients and, together with its affiliates, had aggregate assets under management
or supervision, as of June 5, 1998, of more than $3.9 billion.
WARBURG, 466 Lexington Avenue, New York, New York 10017, acts as sub-advisor to
the International Growth Fund. Warburg is a professional investment counseling
firm which provides investment services to investment companies, employee
benefit plans, endowment funds, foundations and other institutions and
individuals. As of March 30, 1998, Warburg managed
60
<PAGE> 62
approximately $15 billion of assets. Incorporated in 1970, Warburg is indirectly
controlled by Warburg, Pincus & Co. ("WP & Co."), which has no business other
than being a holding company of Warburg and its affiliates. Lionel I. Pincus,
the managing partner of WP & Co., may be deemed to control both WP & Co. and
Warburg. A proxy statement proposing a new sub-advisor for the International
Growth Fund has been submitted to the SEC. Subject to shareholder approval and
approval by the Board of Trustees at an in-person meeting called for such
purpose, it is expected that Capital Guardian Trust Company ("Capital Guardian")
will replace Warburg as sub-advisor to the International Growth Fund, effective
on or about July 1, 1999.
Capital Guardian is wholly-owned by Capital Group International, Inc. which
itself is wholly-owned by the Capital Group Companies, Inc. ("Capital Group").
INDIVIDUAL FUND MANAGERS
Gary J. Pokrzywinski, CFA, Vice President and Senior Portfolio Manager of the
Advisor, is primarily responsible for the day-to-day management of the High
Yield, Income, Short Term High Quality Bond and Target Maturity 2002 Funds. He
has managed such Funds since March 1998, 1992, January 1998 and January 1998,
respectively, and has been employed by the Advisor since 1992. Effective
November 1, 1998, Craig V. Sosey, Vice President and Portfolio Manager of the
Advisor, is primarily responsible for the day-to-day management of the U.S.
Government Securities Fund. He has been employed by the Advisor since May 1998.
Prior to that he was the Assistant Treasurer of California Federal Bank, where
he worked for over eight years. He holds an MBA from University of California
Berkeley. Since February 9, 1999, Randall L. Yoakum, Chairman of the Investment
Committee, has had primary responsibility for the day-to-day management of the
Growth & Income Fund. Prior to assuming these duties, Mr. Yoakum was Chief
Investment Officer for D.A. Davison & Co. (DADCO) for 2 years. From September
1994 until he joined DADCO, Mr. Yoakum was the Senior Vice President and
Managing Director of Portfolio Management for Boatmen's Trust Company, and,
prior to that, Mr. Yoakum was Senior Vice President and Chief Equity Officer for
Composite Research & Management Co. (the predecessor to WM Advisors, Inc.) for 8
years. Jeffrey D. Huffman, CFA, Vice President and Senior Portfolio Manager of
the Advisor, has had primary responsibility for the day-to-day management of the
Bond & Stock Fund since 1995. Prior to 1995, Mr. Huffman was Vice President of
Trust Investments for First Interstate Bank since 1994 and a portfolio manager
at Safeco since 1992. David W. Simpson, CFA, Vice President and Senior Portfolio
Manager of the Advisor, has had primary responsibility for the day-to-day
management of the Northwest Fund since 1993 and he and Linda C. Walk, CFA, who
is Vice President and Portfolio Manager of the Advisor, have been co-managers of
the Emerging Growth Fund since March 1998. Mr. Simpson has been employed by the
Advisor since 1993. Prior to 1997, Ms. Walk was a portfolio manager at Laird
Norton Trust Company since 1996, a valuation consultant for Ernst & Young LLP
since 1994, and a valuation consultant for Management Advising Services since
1990. Audrey S. Quaye, CPA, Vice President and Portfolio Manager of the Advisor,
is primarily responsible for the day-to-day management of the Money Market Fund,
the Tax-Exempt Money Market Fund and the California Money Fund. She has managed
such Funds since 1997, 1997, and March 1998, respectively, and has been employed
by the Advisor since 1996. Prior to 1996, Ms. Quaye worked at the Benham Group
as a municipal credit analyst. Stephen C. Scott, Senior Portfolio Manager, has
had primary responsibility for the day-to-day management of the Strategic Growth
Portfolio, the Conservative Growth Portfolio, the Balanced Portfolio, the
Flexible Income Portfolio and the Income Portfolio since their inception. Mr.
Scott has been employed by WM Advisors, Inc since March of 1998, prior to that
date he was employed by Sierra Investment Services Corporation with essentially
identical responsibility for the Portfolios.
Warren B. Lammert has had primary responsibility for the day-to-day management
of the Growth Fund since its inception. Mr. Lammert is a Vice President of
Janus. Mr. Lammert joined Janus in 1987, and his duties at Janus include the
management of separate equity accounts.
Since May 1992, Joseph A. Piraro, Vice President of Van Kampen, has had primary
responsibility for the day-to-day management of the California Municipal Fund.
Mr. Piraro has been employed by Van Kampen since 1992. Mr. Piraro has also had
primary responsibility for the day-to-day management of the California Insured
Intermediate Municipal Fund since the Fund's inception. Since January 1997,
Thomas M. Byron, Vice President of Van Kampen, has had primary
61
<PAGE> 63
responsibility for the day-to-day management of the Florida Insured Municipal
Fund. Mr. Byron has been at Van Kampen for over 15 years and prior to taking
over responsibility for managing the Fund, Mr. Byron was Head Buyer and Manager
of Van Kampen's Unit Investment Trust desk. David C. Johnson, Senior Vice
President of Van Kampen, has had primary responsibility for the day-to-day
management of the Tax-Exempt Bond Fund's portfolio since January 1, 1999. Mr.
Johnson has been employed by Van Kampen since 1989.
At the date of this Prospectus, the following people are primarily responsible
for the day-to-day management of the International Growth Fund: Harold W.
Ehrlich, CFA, CIC, Managing Director of Warburg, has 14 years of investment
experience. Prior to 1998, Mr. Ehrlich was a senior vice president, portfolio
manager and analyst at Templeton Investment Counsel Inc. Todd Jacobson, CFA,
Vice President of Warburg. Prior to joining Warburg in 1997, Mr. Jacobson was an
analyst at Brown Brothers Harriman from 1993 to 1997.
Subject to shareholder approval, it is expected that effective on or about July
1, 1999, Capital Guardian will assume sub-advisory responsibility for the
International Growth Fund. Capital Guardian employs a team of portfolio managers
each of whom can be considered to have primary responsibility for the day-to-day
management of the portion of the Fund assigned to him or her. They are: David I.
Fisher, Harmut Giesecke, Richard N. Havas, Nancy J. Kyle, John McIlwraith,
Robert Ronus, Lionel M. Sauvage, Nilly Sikorsky and Rudolf M. Staehelin. Mr.
Fisher is Chairman of the Board of Capital Group International, Inc. and Capital
Guardian as well as Vice Chairman of Capital International, Inc., Emerging
Markets Growth Fund, Inc. and also a director of the Capital Group Companies,
Inc. He has been employed by the Capital Group organization for 29 years. Mr.
Giesecke is Chairman of the Board of Capital Group's Japanese investment
management subsidiary, Capital International K.K., and Managing Director,
Asia-Pacific, Capital Group International, Inc. Mr. Giesecke, who has been with
the Capital Group organization for 26 years, is also a Senior Vice President and
a Director of Capital International, Inc. as well as a Senior Vice President of
Capital International Research, Inc. and a Vice President of Emerging Markets
Growth Fund. Mr. Havas, who has been with the Capital Group organization for 13
years, is a Senior Vice President and portfolio manager for Capital Guardian and
Capital International Limited as well as a Senior Vice President and Director of
Capital Guardian (Canada), Inc. Ms. Kyle, who has been with the Capital Group
organization for 8 years, is a Senior Vice President and Director of Capital
Guardian. Ms. Kyle is also President and a Director of Capital Guardian
(Canada), Inc. and a Vice President of Emerging Markets Growth Fund. Mr.
McIlwraith is a Senior Vice President and a Director of Capital Guardian as well
as a Director and Senior Vice President of Capital International Limited. Mr.
McIlwraith is also an international equity portfolio manager and has been with
the Capital Group organization for 15 years. Mr. Ronus is President and a
Director of Capital Guardian, as well as Chairman of the Board of Directors of
Capital Guardian (Canada), Inc., a Director of the Capital Group and Capital
Group International, Inc., and a Senior Vice President of Capital International
S.A. and Capital International Limited. Mr. Ronus has been employed by the
Capital Group organization for 26 years. Mr. Sauvage is a Senior Vice President
and portfolio manager for Capital Guardian and a Vice President for Capital
International Research, Inc. Mr. Sauvage has been employed by the Capital Group
organization for 12 years. Ms. Sikorsky is President and Managing Director of
Capital International S.A., Chairman of Capital International Perspective, S.A.,
Managing Director-Europe and a Director of Capital Group International, Inc., as
well as serving as a Director of the Capital Group, Capital International
Limited and Capital International K.K. Ms. Sikorsky has been employed by the
Capital Group organization for 36 years. Mr. Staehelin is a Senior Vice
President and Director of Capital International Research, Inc. and Capital
International S.A., and has been employed by the Capital Group organization for
17 years.
62
<PAGE> 64
MANAGEMENT FEES
During their most recent fiscal years, each of the Funds paid management fees to
the Advisor at the following rates:
<TABLE>
<CAPTION>
Fees Paid as a Percentage
FUNDS of Net Assets
- -----------------------------------------------------------------------
<S> <C>
Money Market Fund..................... .45%
Tax-Exempt Money Market Fund.......... .45%
California Money Fund................. .45%
Short Term High Quality Bond Fund..... .50%
Target Maturity 2002 Fund............. .25%
U.S. Government Securities Fund....... .54%*
Income Fund........................... .625%*
High Yield Fund....................... .625%**
Tax-Exempt Bond Fund.................. .50%
California Municipal Fund............. .70%*
California Insured Intermediate
Municipal Fund...................... .70%*
Florida Insured Municipal Fund........ .70%**
Bond & Stock Fund..................... .59%
Growth & Income Fund.................. .55%
Northwest Fund........................ .625%
Growth Fund........................... 1.06%*
Emerging Growth Fund.................. 1.08%*
International Growth Fund............. 1.00%
Strategic Growth Portfolio............ .15%
Conservative Growth Portfolio......... .15%
Balanced Portfolio.................... .15%
Flexible Income Portfolio............. .15%
Income Portfolio...................... .15%
</TABLE>
*Effective January 1, 1999, management fees were reduced to 0.50% for the U.S.
Government Securities, Income, California Municipal, California Insured
Intermediate Municipal and Florida Insured Municipal Funds. Also effective
January 1, 1999, management fees were reduced to 0.85% for the Growth and
Emerging Growth Funds.
**The High Yield Fund has not completed a full fiscal year. These numbers
represent the percentages of net assets the Fund has agreed to pay the
Advisor in its first full fiscal year. The fee would be reduced should net
assets exceed $250 million.
The Advisor has undertaken, through October 31, 1999, to waive a portion of its
management fees (and for the Tax-Exempt Money Market and Short Term High Quality
Bond Funds, to reimburse expenses) for the following Funds to the extent that
total Fund operating expenses for Class A shares would otherwise exceed the
indicated annual rates:
<TABLE>
<CAPTION>
Total Fund
FUNDS Operating Expenses
- ------------------------------------------------------------------
<S> <C>
Tax-Exempt Money Market Fund.................. 0.57%
California Money Fund......................... 0.85%
Short-Term High Quality Bond Fund............. 0.82%
Target Maturity 2002 Fund..................... 1.00%
California Insured Intermediate Municipal
Fund........................................ 1.00%
Florida Insured Municipal Fund................ 1.00%
Growth & Income Fund.......................... 1.01%
Income Portfolio.............................. 1.00%
Flexible Income Portfolio..................... 1.00%
</TABLE>
The Advisor has also undertaken, through October 31, 2000, to waive its
management fees and reimburse expenses to the extent necessary to limit the
total Fund operating expenses for Class A shares of the Tax-Exempt Money Market
Fund and the Short Term High Quality Bond Fund to the annual rates of 0.72% and
1.00%, respectively.
In addition, the Distributor has agreed to waive its distribution fees through
October 31, 1999 for Class B shares of the following Funds to the extent that
total Fund operating expenses for Class B shares would otherwise exceed the
indicated annual rates:
<TABLE>
<CAPTION>
Total Fund
FUNDS Operating Expenses
- ------------------------------------------------------------------
<S> <C>
Income Fund................................... 1.83%
Growth & Income Fund.......................... 1.76%
Growth Fund................................... 2.05%
</TABLE>
The Advisor has also undertaken to waive its management fees and reimburse
expenses to the extent necessary to limit the total Fund operating expenses for
Class A shares of the following funds to the indicated annual rates through
October 31, 2000.
<TABLE>
<CAPTION>
Total Fund
FUNDS Operating Expenses
- ------------------------------------------------------------------
<S> <C>
Money Market Fund............................. 0.73%
U.S. Government Securities Fund............... 0.96%
Tax-Exempt Bond Fund.......................... 0.88%
California Municipal Fund..................... 0.88%
Income Fund................................... 1.04%
Growth & Income Fund.......................... 1.00%
Growth Fund................................... 1.30%
</TABLE>
In addition, the Advisor has undertaken, through October 31, 1999, to waive all
of its management fees for the High Yield Fund.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE FUNDS'
AND PORTFOLIOS' OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFERING OF THE
FUNDS' AND PORTFOLIOS' SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS
OR PORTFOLIOS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN
WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFER MAY NOT LAWFULLY BE MADE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
63
<PAGE> 65
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
The financial highlights table is intended to help you understand the Funds' and
Portfolios' financial performance for the past 5 years (or, if shorter, the
period of the Fund's or Portfolio's operations). The financial information
reflects financial results for a single Fund or Portfolio share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Fund or Portfolio (assuming reinvestment of all
dividends and distributions). The information provided below with respect to
each of the Funds within WM Trust I (Money Market, Tax-Exempt Money Market,
Income, U.S. Government Securities, Tax-Exempt Bond, Bond & Stock, Growth &
Income and Northwest Funds) for periods prior to October 31, 1998 has been
audited by LeMaster & Daniels PLLC. The information provided below with respect
to each of the Funds within WM Trust II (California Money, Short Term High
Quality Bond, Target Maturity 2002, California Municipal, California Insured
Intermediate Municipal, Florida Insured Municipal, Growth, International Growth
and Emerging Growth Funds) and the Portfolios for periods prior to October 31,
1998 has been audited by PricewaterhouseCoopers LLP. The information for the
period ended October 31, 1998 has been audited by Deloitte & Touche LLP. The
Reports of Independent Accountants for each such period, along with the Funds'
and Portfolios' financial statements, are included in the Annual Reports to
Shareholders for such periods, which are available upon request.
MONEY MARKET FUND CLASS A SHARES(15)
<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED YEAR ENDED DECEMBER 31,
OCTOBER 31, -----------------------------------------------
1998(1) 1997 1996 1995 1994 1993
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.041 0.0493 0.0476 0.0519 0.0341 0.024
Net Realized & Unrealized Gain on Investments............. - - - - - -
-------- -------- -------- -------- -------- --------
Total From Investment Operations........................ 0.041 0.0493 0.0476 0.0519 0.0341 0.024
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.041) (0.0493) (0.0476) (0.0519) (0.0341) (0.024)
Distributions from Net Realized Gains..................... - - - - - -
-------- -------- -------- -------- -------- --------
Total Distributions..................................... (0.041) (0.0493) (0.0476) (0.0519) (0.0341) (0.024)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period.............................. $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
======== ======== ======== ======== ======== ========
Total Return(2)............................................. 4.19% 5.04% 4.88% 5.33% 3.47% 2.41%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $403,443 $260,877 $229,355 $171,225 $125,651 $135,187
Ratio of Operating Expenses to Average Net Assets(3)...... 0.66%(5) 0.75% 0.79% 0.92% 0.95% 0.97%
Ratio of Net Investment Income to Average Net Assets...... 4.94%(5) 4.93% 4.77% 5.19% 3.39% 2.38%
Ratio of Operating Expenses to Average Net Assets Without
Fee Waivers, Expenses Absorbed and/or Credits Allowed by
the Custodian............................................ 0.67%(5) 0.83% 0.89% 1.04% 1.04% 1.03%
</TABLE>
MONEY MARKET FUND CLASS B SHARES(15)
<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED YEAR ENDED DECEMBER 31,
OCTOBER 31, --------------------------------------
1998(1) 1997 1996 1995 1994(14)
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.035 0.0407 0.0384 0.0421 0.018
Net Realized & Unrealized Gain on Investments............. - - - - -
------- ------- ------- ------- -------
Total From Investment Operations........................ 0.035 0.0407 0.0384 0.0421 0.018
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.035) (0.0407) (0.0384) (0.0421) (0.018)
Distributions from Net Realized Gains..................... - - - - -
------- ------- ------- ------- -------
Total Distributions..................................... (0.035) (0.0407) (0.0384) (0.0421) (0.018)
------- ------- ------- ------- -------
Net Asset Value, End of Period.............................. $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
======= ======= ======= ======= =======
Total Return(2)............................................. 3.52% 4.15% 3.91% 4.30% 2.78%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $6,619 $471 $117 $74 $11
Ratio of Operating Expenses to Average Net Assets(3)...... 1.64%(5) 1.59% 1.69% 1.94% 1.93%(5)
Ratio of Net Investment Income to Average Net Assets...... 3.96%(5) 4.15% 3.87% 4.19% 3.29%(5)
Ratio of Operating Expenses to Average Net Assets Without
Fee Waivers, Expenses Absorbed and/or Credits Allowed by
the Custodian............................................ 1.65%(5) 1.80% 1.90% 2.10% 2.62%(5)
</TABLE>
Footnotes appear on page 85
64
<PAGE> 66
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
TAX-EXEMPT MONEY MARKET FUND CLASS A SHARES(16)
<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED YEAR ENDED DECEMBER 31,
OCTOBER 31, ---------------------------------------------------
1998(1) 1997 1996 1995 1994 1993
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.026 0.0314 0.0301 0.034 0.0235 .020
Net Realized & Unrealized Gain on Investments............. - - - 0.000(8) - -
------- ------- ------- ------- ------- -------
Total From Investment Operations........................ 0.026 0.0314 0.0301 0.034 0.0235 .020
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.026) (0.0314) (0.0301) (0.034) (0.0235) (.020)
Distributions from Net Realized Gains..................... - - - 0.000(8) - -
------- ------- ------- ------- ------- -------
Total Distributions..................................... (0.026) 0.0314 (0.0301) (0.034) (0.0235) (0.20)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period.............................. $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
======= ======= ======= ======= ======= =======
Total Return(2)............................................. 2.60% 3.18% 3.05% 4.01% 2.37% 2.06%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $25,441 $32,134 $31,974 $30,988 $33,612 $34,513
Ratio of Operating Expenses to Average Net Assets(3)...... 0.55%(5) 0.57% 0.57% 0.61% 0.60% 0.50%
Ratio of Net Investment Income to Average Net Assets...... 3.09%(5) 3.14% 3.01% 3.39% 2.33% 2.03%
Ratio of Operating Expenses to Average Net Assets Without
Fee Waivers, Expenses Absorbed and/or Credits Allowed by
the Custodian............................................ 0.72%(5) 0.71% 0.72% 0.81% 0.76% 0.77%
</TABLE>
TAX-EXEMPT MONEY MARKET FUND CLASS B SHARES(16)
<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED YEAR ENDED DECEMBER 31, MAY 2, 1994 TO
OCTOBER 31, --------------------------- DECEMBER 31,
1998(1) 1997 1996 1995 1994(4)
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.018 0.0223 0.0199 0.023 0.0097
Net Realized & Unrealized Gain on Investments............. - - - 0.00(8) -
------- ------- ------- ------- -------
Total From Investment Operations........................ 0.018 0.0223 0.0199 0.023 0.0097
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.018) (0.0223) (0.0199) (0.023) (0.0097)
Distributions from Net Realized Gains..................... - - - 0.00(8) -
------- ------- ------- ------- -------
Total Distributions..................................... (0.018) (0.0223) (0.0199) (0.023) (0.0097)
------- ------- ------- ------- -------
Net Asset Value, End of Period.............................. $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
======= ======= ======= ======= =======
Total Return(2)............................................. 1.79% 2.26% 2.01% 2.83% 1.45%(5)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $ 212 $ 12 $ 2 $ 1 $ 1
Ratio of Operating Expenses to Average Net Assets(3)...... 1.63%(5) 1.50% 1.53% 1.73% 1.66%(5)
Ratio of Net Investment Income to Average Net Assets...... 2.01%(5) 2.32% 1.99% 2.12% 1.38%(5)
Ratio of Operating Expenses to Average Net Assets Without
Fee Waivers, Expenses Absorbed and/or Credits Allowed by
the Custodian............................................ 1.80%(5) 2.27% 4.22% 3.66% 3.61%(5)
</TABLE>
Footnotes appear on page 85
65
<PAGE> 67
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CALIFORNIA MONEY FUND CLASS A SHARES
<TABLE>
<CAPTION>
FISCAL
PERIOD
ENDED YEAR ENDED JUNE 30,
OCTOBER 31, -----------------------------------------------
1998(1) 1998(6) 1997 1996 1995 1994
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.008 0.027 0.028 0.029 0.028 0.018
Net Realized & Unrealized Gain on Investments............. - - - - - -
------- ------- ------- ------- ------- -------
Total From Investment Operations........................ 0.008 0.027 0.028 0.029 0.028 0.018
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.008) (0.027) (0.028) (0.029) (0.028) (0.018)
Distributions in Excess of Net Investment Income.......... - - - - - -
Distributions from Net Realized Gains..................... - - - - - -
Distributions in Excess of Net Realized Gains............. - - - - - -
Distributions from Capital................................ - - - - - -
------- ------- ------- ------- ------- -------
Total Distributions..................................... (0.008) (0.027) (0.028) (0.029) (0.028) (0.018)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period.............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
Total Return(2)............................................. 0.99% 2.73% 2.81% 3.00% 2.79% 1.81%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $37,167 $37,403 $42,923 $51,211 $48,836 $62,500
Ratio of Operating Expenses to Average Net Assets(3)...... 0.73%(5) 0.82% 0.85% 0.85% 0.85% 0.85%
Ratio of Net Investment Income to Average Net Assets...... 2.31%(5) 2.71% 2.75% 2.94% 2.73% 1.80%
Ratio of Operating Expenses to Average Net Assets Without
Fee Waivers, Expenses Absorbed and/or Credits Allowed by
the Custodian............................................ 0.87%(5) 0.99% 1.14% 1.14% 1.15% 1.27%
</TABLE>
CALIFORNIA MONEY FUND CLASS B SHARES
<TABLE>
<CAPTION>
FISCAL
PERIOD
ENDED YEAR ENDED JUNE 30,
OCTOBER 31, --------------------------------------
1998(1) 1998(6) 1997 1996 1995(7)
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.005 0.019 0.020 0.022 0.020
Net Realized & Unrealized Gain on Investments............. - - - - -
------ ------ ------ ------ ------
Total From Investment Operations........................ 0.005 0.019 0.020 0.022 0.020
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.005) (0.019) (0.020) (0.022) (0.020)
Distributions in Excess of Net Investment Income.......... - - - - -
Distributions from Net Realized Gains..................... - - - - -
Distributions in Excess of Net Realized Gains............. - - - - -
Distributions from Capital................................ - - - - -
------ ------ ------ ------ ------
Total Distributions..................................... (0.005) (0.019) (0.020) (0.022) (0.020)
------ ------ ------ ------ ------
Net Asset Value, End of Period.............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total Return(2)............................................. 0.63% 1.96% 2.03% 2.22% 2.04%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $ 58 $ 63 $ 68 $ 147 $ 79
Ratio of Operating Expenses to Average Net Assets(3)...... 1.60%(5) 1.60% 1.60% 1.60% 1.60%
Ratio of Net Investment Income to Average Net Assets...... 1.44%(5) 1.88% 2.00% 2.19% 1.98%
Ratio of Operating Expenses to Average Net Assets Without
Fee Waivers, Expenses Absorbed and/or Credits Allowed by
the Custodian............................................ 2.05%(5) 1.82%(10) 1.89% 1.89% 1.90%
</TABLE>
Footnotes appear on page 85
66
<PAGE> 68
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
SHORT TERM HIGH QUALITY BOND FUND CLASS A SHARES
<TABLE>
<CAPTION>
FISCAL
PERIOD NOVEMBER 1,
ENDED YEAR ENDED JUNE 30, 1993 TO
OCTOBER 31, ------------------------------------------------------- JUNE 30,
1998(1) 1998(6) 1997 1996 1995 1994(4)
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period.......................... $ 2.32 $ 2.32 $ 2.32 $ 2.35 $ 2.39 $ 2.50
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net Investment Income......... 0.04 0.13 0.14 0.15(9) 0.08 0.09
Net Realized & Unrealized
Gain/(Loss) on Investments... 0.03 0.00(8) 0.00(8) (0.03) 0.02 (0.11)
------- ------- ------- ------- ------- -------
Total From Investment
Operations.................. 0.07 0.13 0.14 0.12 0.10 (0.02)
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from Net Investment
Income....................... (0.04) (0.13) (0.14) (0.15) (0.08) (0.09)
Distributions in Excess of Net
Investment Income............ - - - - (0.06) -
Distributions from Net
Realized Gains............... - - - - - -
Distributions in Excess of Net
Realized Gains............... - - - - - -
Distributions from Capital.... - (0.00)(8) - (0.00)(8) (0.00)(8) -
------- ------- ------- ------- ------- -------
Total Distributions......... (0.04) (0.13) (0.14) (0.15) (0.14) (0.09)
------- ------- ------- ------- ------- -------
Net Asset Value, End of
Period.......................... $ 2.35 $ 2.32 $ 2.32 $ 2.32 $ 2.35 $ 2.39
======= ======= ======= ======= ======= =======
Total Return(2)................. 3.11% 5.91% 6.15% 5.05% 4.42% (0.73)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period
($1,000's)................... $32,748 $35,551 $13,685 $32,440 $43,811 $21,771
Ratio of Operating Expenses to
Average Net Assets(3)........ 0.82%(5) 0.86% 0.82% 0.75% 0.75% 0.00%(5)
Ratio of Net Investment Income
to Average Net Assets........ 5.44%(5) 5.71% 6.50% 6.22% 6.10% 5.70%(5)
Portfolio Turnover Rate....... 19% 138% 51% 225% 137% 95%
Ratio of Operating Expenses to
Average Net Assets Without
Fee Waivers, Expenses
Absorbed and/or Credit
Allowed by the Custodian..... 1.40%(5) 1.32%(10) 1.45%(10) 1.42%(10) 1.39% 1.61%(5)
</TABLE>
SHORT TERM HIGH QUALITY BOND FUND CLASS B SHARES
<TABLE>
<CAPTION>
FISCAL
PERIOD
ENDED YEAR ENDED JUNE 30,
OCTOBER 31, -----------------------------------------------------
1998(1) 1998(6) 1997 1996 1995(7)
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................. $ 2.32 $ 2.32 $ 2.32 $ 2.35 $ 2.39
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income.............................. 0.04 0.12 0.12 0.13(9) 0.06
Net Realized & Unrealized Gain/(Loss) on
Investments....................................... 0.03 0.00(8) 0.00(8) (0.03) 0.02
------ ------ ------ ------ ------
Total From Investment Operations................. 0.07 0.12 0.12 0.10 0.08
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income............... (0.04) (0.12) (0.12) (0.13) (0.06)
Distributions in Excess of Net Investment Income... - - - - (0.06)
Distributions from Net Realized Gains.............. - - - - -
Distributions in Excess of Net Realized Gains...... - - - - -
Distributions from Capital......................... - (0.00)(8) - (0.00)(8) (0.00)(8)
------ ------ ------ ------ ------
Total Distributions.............................. (0.04) (0.12) (0.12) (0.13) (0.12)
------ ------ ------ ------ ------
Net Asset Value, End of Period....................... $ 2.35 $ 2.32 $ 2.32 $ 2.32 $ 2.35
====== ====== ====== ====== ======
Total Return(2)...................................... 2.85% 5.13% 5.37% 4.27% 3.64%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)............... $3,747 $3,459 $2,994 $3,437 $3,015
Ratio of Operating Expenses to Average Net
Assets(3)......................................... 1.57%(5) 1.61% 1.57% 1.50% 1.50%
Ratio of Net Investment Income to Average Net
Assets............................................ 4.69%(5) 4.96% 5.75% 5.47% 5.35%
Portfolio Turnover Rate............................ 19% 138% 51% 225% 137%
Ratio of Operating Expenses to Average Net Assets
Without Fee Waivers, Expenses Absorbed and/or
Credit Allowed by the Custodian................... 2.18%(5) 2.07%(10) 2.20%(10) 2.17%(10) 2.14%(10)
</TABLE>
Footnotes appear on page 85
67
<PAGE> 69
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
TARGET MATURITY 2002 FUND CLASS A SHARES
<TABLE>
<CAPTION>
FISCAL MARCH 20,
PERIOD ENDED YEAR ENDED JUNE 30, 1995 TO
OCTOBER 31, --------------------------- JUNE 30,
1998(1) 1998(6) 1997 1996 1995(4)
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $10.86 $10.69 $10.72 $10.78 $10.00
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.23 0.61(9) 0.62(9) 0.63 0.12
Net Realized & Unrealized Gain/(Loss) on Investments...... 0.57 0.40 0.11 (0.30) 0.66
------ ------ ------ ------ ------
Total From Investment Operations........................ 0.80 1.01 0.73 0.33 0.78
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... - (0.73) (0.71) (0.39) -
Distributions from Net Realized Gains..................... - (0.11) (0.05) - -
------ ------ ------ ------ ------
Total Distributions..................................... - (0.84) (0.76) (0.39) -
------ ------ ------ ------ ------
Net Asset Value, End of Period.............................. $11.66 $10.86 $10.69 $10.72 $10.78
====== ====== ====== ====== ======
Total Return(2)............................................. 7.37% 9.78% 6.95% 2.91% 7.80%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $2,385 $2,536 $2,816 $3,125 $2,626
Ratio of Operating Expenses to Average Net Assets(3)...... 0.64%(5) 0.62% 0.64% 0.62% 0.74%(5)
Ratio of Net Investment Income to Average Net Assets...... 5.92%(5) 5.61% 5.80% 5.66% 5.22%(5)
Portfolio Turnover Rate................................... 0% 0% 0% 5% 0%
Ratio of Operating Expenses to Average Net Assets Without
Credits Allowed by the Custodian......................... - 0.71%(10) 0.72%(10) 0.70%(10) N/A
Ratio of Operating Expenses to Average Net Assets Without
Fee Waivers, Expenses Absorbed and/or Credits Allowed by
the Custodian............................................ 1.47%(5) 2.63%(10) 2.89%(10) 2.55%(10) 4.71%(5)
</TABLE>
Footnotes appear on page 85
68
<PAGE> 70
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
U.S. GOVERNMENT SECURITIES FUND CLASS A SHARES(17)
<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED YEAR ENDED DECEMBER 31,
OCTOBER 31, ----------------------------------------------------
1998(1) 1997 1996 1995 1994 1993
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 10.84 $ 10.46 $ 10.84 $ 9.64 $ 10.79 $ 10.63
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.54 0.62 0.63 0.63 0.63 0.69
Net Realized & Unrealized Gain/(Loss) on Investments...... 0.14 0.38 (0.38) 1.20 (1.15) 0.16
-------- -------- -------- -------- -------- --------
Total From Investment Operations........................ 0.68 1.00 0.25 1.83 (0.52) 0.85
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.54) (0.62) (0.63) (0.63) (0.63) (0.69)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period.............................. $ 10.98 $ 10.84 $ 10.46 $ 10.84 $ 9.64 $ 10.79
======== ======== ======== ======== ======== ========
Total Return(2)............................................. 6.38% 9.92% 2.48% 19.45% (4.91)% 8.12%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $266,334 $107,054 $138,159 $177,310 $188,068 $268,112
Ratio of Operating Expenses to Average Net Assets(3)...... 0.92%(5) 1.05% 0.97% 1.01% 0.97% 0.99%
Ratio of Net Investment Income to Average Net Assets...... 5.99%(5) 5.92% 6.01% 6.08% 6.19% 6.29%
Portfolio Turnover Rate................................... 12% 6% 16% 8% 34% 51%
Ratio of operating expenses to average net assets w/o fee
waivers or fees reduced by credits allowed by the
custodian................................................ 1.45%(5) 1.05% 0.97% 1.01% 0.97% 0.99%
Ratio of operating expenses to average net assets
including interest expense............................... 1.36%(5) N/A N/A N/A N/A N/A
</TABLE>
U.S. GOVERNMENT SECURITIES FUND CLASS B SHARES(17)
<TABLE>
<CAPTION>
FISCAL MARCH 20,
PERIOD ENDED YEAR ENDED DECEMBER 31, 1994 TO
OCTOBER 31, ------------------------ DECEMBER 31,
1998(1) 1997 1996 1995 1994(8)
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 10.84 $10.46 $10.84 $ 9.64 $ 10.24
------- ------ ------ ------ -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.47 0.54 0.54 0.54 0.41
Net Realized & Unrealized Gain/(Loss) on Investments...... 0.12 0.38 (0.38) 1.20 (0.60)
------- ------ ------ ------ -------
Total From Investment Operations........................ 0.59 0.92 0.16 1.74 (0.19)
------- ------ ------ ------ -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.46) (0.54) (0.54) (0.54) (0.41)
------- ------ ------ ------ -------
Net Asset Value, End of Period.............................. $ 10.97 $10.84 $10.46 $10.84 $9.64
======= ====== ====== ====== =======
Total Return(2)............................................. 5.54% 9.03% 1.58% 18.48% (1.86)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $28,747 $3,352 $2,963 $2,206 $ 1,063
Ratio of Operating Expenses to Average Net Assets(3)...... 1.67%(5) 1.84% 1.85% 1.84% 1.76%(5)
Ratio of Net Investment Income to Average Net Assets...... 5.24%(5) 5.08% 5.14% 5.20% 5.43%(5)
Portfolio Turnover Rate................................... 12% 6% 16% 8% 34%
Ratio of operating expenses to average net assets w/o fee
waivers or fees reduced by credits allowed by the
custodian................................................ 2.22%(5) 1.84% 1.85% 1.84% 1.76%
Ratio of operating expenses to average net assets
including interest expense............................... 2.12%(5) N/A N/A N/A N/A
</TABLE>
Footnotes appear on page 85
69
<PAGE> 71
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
INCOME FUND CLASS A SHARES(19)
<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED YEAR ENDED DECEMBER 31,
OCTOBER 31, ------------------------------------------------
1998(1) 1997 1996 1995 1994 1993
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period:....................... $ 9.48 $ 9.15 $ 9.44 $ 8.29 $ 9.33 $ 8.99
-------- ------- ------- ------- ------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.53 0.60 0.59 0.59 0.60 0.61
Net Realized & Unrealized Gain/(Loss) on Investments...... (0.04)(12) 0.33 (0.29) 1.15 (1.04) 0.34
-------- ------- ------- ------- ------- --------
Total From Investment Operations........................ 0.49 0.93 0.30 1.74 (0.44) 0.95
-------- ------- ------- ------- ------- --------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.53) (0.60) (0.59) (0.59) (0.60) (0.61)
-------- ------- ------- ------- ------- --------
Net Asset Value, End of Period.............................. $ 9.44 $ 9.48 $ 9.15 $ 9.44 $ 8.29 $ 9.33
======== ======= ======= ======= ======= ========
Total Return(2)............................................. 5.21% 10.51% 3.46% 21.58% (4.82)% 10.82%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $213,397 $77,864 $86,657 $97,534 $88,102 $104,876
Ratio of Operating Expenses to Average Net Assets(3)...... 1.07%(5) 1.08% 1.03% 1.08% 1.04% 1.08%
Ratio of Net Investment Income to Average Net Assets...... 6.66%(5) 6.47% 6.52% 6.59% 6.83% 6.58%
Portfolio Turnover Rate................................... 37% 27% 42% 43% 26% 51%
</TABLE>
INCOME FUND CLASS B SHARES(19)
<TABLE>
<CAPTION>
FISCAL MARCH 30,
PERIOD ENDED YEAR ENDED DECEMBER 31, 1994 TO
OCTOBER 31, ------------------------ APRIL 30,
1998(1) 1997 1996 1995 1994(18)
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period:....................... $ 9.49 $ 9.17 $ 9.46 $ 8.30 $ 8.85
------- ------ ------ ------ -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.46 0.53 0.52 0.51 0.40
Net Realized & Unrealized Gain/(Loss) on Investments...... (0.04)(12) 0.32 (0.29) 1.16 (0.55)
------- ------ ------ ------ -------
Total From Investment Operations........................ 0.42 0.85 0.23 1.67 (0.15)
------- ------ ------ ------ -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.46) (0.53) (0.52) (0.51) (0.40)
------- ------ ------ ------ -------
Net Asset Value, End of Period.............................. $ 9.45 $ 9.49 $ 9.17 $ 9.46 $ 8.30
======= ====== ====== ====== =======
Total Return(2)............................................. 4.51% 9.51% 2.59% 20.70% (1.67)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $34,321 $9,691 $7,122 $4,452 $ 2,299
Ratio of Operating Expenses to Average Net Assets(3)...... 1.84%(5) 1.86% 1.89% 1.91% 1.80%(5)
Ratio of Net Investment Income to Average Net Assets...... 5.89%(5) 5.65% 5.69% 5.73% 6.25%(5)
Portfolio Turnover Rate................................... 37% 27% 42% 43% 26%
</TABLE>
Footnotes appear on page 85
70
<PAGE> 72
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
HIGH YIELD FUND CLASS A SHARES
<TABLE>
<CAPTION>
FISCAL PERIOD
APRIL 8, 1998 -
OCTOBER 31, 1998(4)
--------------------
<S> <C>
Net Asset Value, Beginning of Period........................ $ 10.00
-------
INCOME FROM INVESTMENT OPERATIONS:
Net Investments Income.................................... 0.47
Net Realized & Unrealized Loss on Investments............. (1.15)
-------
Total from Investment Operations........................ (0.68)
-------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.45)
Distributions in Excess of Net Investment Income.......... (0.01)
Distributions from Net Realized Gains..................... -
Distributions in Excess of Net Realized Gains............. -
Distributions from Capital................................ -
-------
Total Distributions..................................... (0.46)
-------
Net Asset Value, End of Period.............................. $ 8.86
=======
Total Return(5)............................................. (6.90)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets End of Period ($1,000's)....................... $10,861
Ratio of Operating Expenses to Average Net Assets(12)..... 0.78%(5)
Ratio of Net Investment Income to Average Net Assets...... 8.80%(5)
Portfolio Turnover Rate................................... 54%
Ratio of Operating Expenses to Average Net Assets Without
Fee Waivers or fees reduced by Credits Allowed by the
Custodian................................................ 1.22%(5)
</TABLE>
HIGH YIELD FUND CLASS B SHARES
<TABLE>
<CAPTION>
FISCAL PERIOD
MAY 5, 1998 -
OCTOBER 31, 1998(4)
---------------------
<S> <C>
Net Asset Value, Beginning of Period........................ $ 10.00
-------
INCOME FROM INVESTMENT OPERATIONS:
Net Investments Income.................................... 0.42
Net Realized & Unrealized Loss on Investments............. (1.09)
-------
Total from Investment Operations........................ (0.67)
-------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.42)
Distributions in Excess of Net Investment Income.......... (0.01)
Distributions from Net Realized Gains..................... -
Distributions in Excess of Net Realized Gains............. -
Distributions from Capital................................ -
-------
Total Distributions..................................... (0.43)
-------
Net Asset Value, End of Period.............................. $ 8.90
=======
Total Return(5)............................................. (6.33)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets End of Period ($1,000's)....................... $ 2,830
Ratio of Operating Expenses to Average Net Assets(12)..... 1.57%(5)
Ratio of Net Investment Income to Average Net Assets...... 8.01%(5)
Portfolio Turnover Rate................................... 54%
Ratio of Operating Expenses to Average Net Assets Without
Fee Waivers or fees reduced by Credits Allowed by the
Custodian................................................ 2.02%(5)
</TABLE>
Footnotes appear on page 85
71
<PAGE> 73
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
TAX EXEMPT BOND FUND CLASS A SHARES(21)
<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED YEAR ENDED DECEMBER 31,
OCTOBER 31, --------------------------------------------------
1998(1) 1997 1996 1995 1994 1993
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 8.09 $ 7.83 $ 8.02 $ 7.13 $ 8.04 $ 7.58
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.34 0.38 0.38 0.38 0.39 0.40
Net Realized & Unrealized Gain/(Loss) on Investments...... 0.02 0.27 (0.19) 0.89 (0.91) 0.54
-------- -------- -------- -------- -------- --------
Total From Investment Operations........................ 0.36 0.65 0.19 1.27 (0.52) 0.94
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.34) (0.38) (0.38) (0.38) (0.39) (0.40)
Distribution from Capital Gains........................... - (0.01) - - - (0.08)
-------- -------- -------- -------- -------- --------
Total Distributions..................................... (0.34) (0.39) (0.38) (0.38) (0.39) (0.48)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period.............................. $ 8.11 $ 8.09 $ 7.83 $ 8.02 $ 7.13 $ 8.04
======== ======== ======== ======== ======== ========
Total Return(2)............................................. 4.58% 8.59% 2.52% 18.25% (6.53)% 12.54%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $301,162 $188,021 $203,606 $230,055 $215,438 $259,045
Ratio of Operating Expenses to Average Net Assets(3)...... 0.84%(5) 0.80% 0.75% 0.81% 0.79% 0.81%
Ratio of Net Investment Income to Average Net Assets...... 5.14%(5) 4.84% 4.90% 5.03% 5.23% 4.97%
Portfolio Turnover Rate................................... 6% 21% 22% 8% 12% 19%
</TABLE>
TAX-EXEMPT BOND FUND CLASS B SHARES(21)
<TABLE>
<CAPTION>
FISCAL MARCH 20,
PERIOD ENDED YEAR ENDED DECEMBER 31, 1994 TO
OCTOBER 31, ------------------------- DECEMBER 31,
1998(1) 1997 1996 1995 1994(18)
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 8.09 $ 7.83 $ 8.02 $ 7.13 $ 7.49
------- ------ ------ ------ -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.28 0.32 0.31 0.32 0.25
Net Realized & Unrealized Gain/(Loss) on Investments...... 0.03 0.27 (0.19) 0.89 (0.36)
------- ------ ------ ------ -------
Total From Investment Operations........................ 0.31 0.59 0.12 1.21 (0.11)
------- ------ ------ ------ -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.29) (0.32) (0.31) (0.32) (0.25)
Distribution from Capital Gains........................... - (0.01) - - -
------- ------ ------ ------ -------
Total Distributions..................................... (0.29) (0.33) - - -
------- ------ ------ ------ -------
Net Asset Value, End of Period.............................. $ 8.11 $ 8.09 $ 7.83 $ 8.02 $ 7.13
======= ====== ====== ====== =======
Total Return(2)............................................. 3.88% 7.71% 1.61% 17.30% (1.46)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $17,344 $8,110 $5,266 $2,682 $ 1,258
Ratio of Operating Expenses to Average Net Assets(3)...... 1.62%(5) 1.62% 1.65% 1.62% 1.58%(5)
Ratio of Net Investment Income to Average Net Assets...... 4.36%(5) 4.00% 4.01% 4.18% 4.53%(5)
Portfolio Turnover Rate................................... 6% 21% 22% 8% 12%
</TABLE>
Footnotes appear on page 85
72
<PAGE> 74
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CALIFORNIA MUNICIPAL FUND CLASS A SHARES
<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED YEAR ENDED JUNE 30,
OCTOBER 31, ------------------------------------------------
1998(1) 1998(6) 1997 1996 1995 1994
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 11.33 $ 10.92 $ 10.60 $ 10.53 $ 10.38 $ 11.22
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net Investments Income.................................... 0.19(9) 0.58(9) 0.59 0.60(9) 0.61 0.61
Net Realized & Unrealized Gain/(Loss) on Investments...... 0.13 0.41 0.32 0.07 0.15 (0.82)
-------- -------- -------- -------- -------- --------
Total From Investment Operations........................ 0.32 0.99 0.91 0.67 0.76 (0.21)
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.19) (0.58) (0.59) (0.60) (0.61) (0.61)
Distributions in Excess of Net Investment Income.......... - - - - - (0.00)(8)
Distributions from Net Realized Gains..................... - - - - (0.00)(8) -
Distributions in Excess of Net Realized Gains............. - - - - - (0.02)
Distributions from Capital................................ - - - - - -
-------- -------- -------- -------- -------- --------
Total Distributions..................................... (0.19) (0.58) (0.59) (0.60) (0.61) (0.63)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period.............................. $ 11.46 $ 11.33 $ 10.92 $ 10.60 $ 10.53 $ 10.38
======== ======== ======== ======== ======== ========
Total Return(2)............................................. 2.82% 9.26% 8.83% 6.40% 7.57% (2.19)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $287,590 $290,328 $318,251 $372,177 $405,967 $509,223
Ratio of Operating Expenses to Average Net Assets(3)...... 0.97%(5) 1.00% 0.97% 0.94% 0.85% 0.79%
Ratio of Net Investment Income to Average Net Assets...... 4.87%(5) 5.18% 5.51% 5.56% 5.89% 5.45%
Portfolio Turnover Rate................................... 28% 87% 36% 17% 22% 50%
Ratio of Operating Expenses to Average Net Assets Without
Fee Waivers, Expenses Absorbed and/or Credits Allowed by
the Custodian............................................ 1.05%(5) 1.19%(10) 1.26%(10) 1.29%(10) 1.29% 1.39%
</TABLE>
CALIFORNIA MUNICIPAL FUND CLASS B SHARES
<TABLE>
<CAPTION>
FISCAL
PERIOD
ENDED YEAR ENDED JUNE 30,
OCTOBER 31, --------------------------------------
1998(1) 1998(6) 1997 1996 1995(7)
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 11.33 $ 10.92 $ 10.60 $ 10.53 $10.38
------- ------- ------- ------- ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investments Income.................................... 0.16(9) 0.50(9) 0.51 0.51(9) 0.53
Net Realized & Unrealized Gain on Investments............. 0.13 0.41 0.32 0.07 0.15
------- ------- ------- ------- ------
Total From Investment Operations........................ 0.29 0.91 0.83 0.58 0.68
------- ------- ------- ------- ------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.16) (0.50) (0.51) (0.51) (0.53)
Distributions in Excess of Net Investment Income.......... - - - - -
Distributions from Net Realized Gains..................... - - - - (0.00)(8)
Distributions in Excess of Net Realized Gains............. - - - - -
Distributions from Capital................................ - - - - -
------- ------- ------- ------- ------
Total Distributions..................................... (0.16) (0.50) (0.51) (0.51) (0.53)
------- ------- ------- ------- ------
Net Asset Value, End of Period.............................. $ 11.46 $ 11.33 $ 10.92 $ 10.60 $10.53
======= ======= ======= ======= ======
Total Return(2)............................................. 2.56% 8.45% 8.02% 5.61% 6.78%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $49,683 $34,537 $25,219 $20,543 $7,230
Ratio of Operating Expenses to Average Net Assets(3)...... 1.72%(5) 1.75% 1.72% 1.69% 1.60%
Ratio of Net Investment Income to Average Net Assets...... 4.12%(5) 4.42% 4.76% 4.81% 5.14%
Portfolio Turnover Rate................................... 28% 87% 36% 17% 22%
Ratio of Operating Expenses to Average Net Assets Without
Fee Waivers, Expenses Absorbed and/or Credits Allowed by
the Custodian............................................ 1.81%(5) 1.95%(10) 2.01%(10) 2.04%(10) 2.04%
</TABLE>
Footnotes appear on page 85
73
<PAGE> 75
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND CLASS A SHARES
<TABLE>
<CAPTION>
FISCAL
PERIOD APRIL 4,
ENDED YEAR ENDED JUNE 30, 1994 TO
OCTOBER 31, -------------------------------------- JUNE 30,
1998(1) 1998(6) 1997 1996 1995 1994(4)
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 10.81 $ 10.74 $ 10.56 $ 10.45 $ 10.10 $ 10.00
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investments Income.................................... 0.16 0.49 0.49(9) 0.49 0.50 0.11
Net Realized & Unrealized Gain on Investments............. 0.21 0.17 0.23 0.15 0.35 0.11(12)
------- ------- ------- ------- ------- -------
Total From Investment Operations........................ 0.37 0.66 0.72 0.64 0.85 0.22
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.16) (0.49) (0.49) (0.49) (0.50) (0.11)
Distributions in Excess of Net Investment Income.......... - (0.00)(8) - - - -
Distributions from Net Realized Gains..................... - (0.10) (0.05) (0.04) - (0.01)
Distributions in Excess of Net Realized Gains............. - - - - - -
Distributions from Capital................................ - - - - - -
------- ------- ------- ------- ------- -------
Total Distributions..................................... (0.16) (0.59) (0.54) (0.53) (0.50) (0.12)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period.............................. $ 11.02 $ 10.81 $ 10.74 $ 10.56 $ 10.45 $ 10.10
======= ======= ======= ======= ======= =======
Total Return(2)............................................. 3.46% 6.26% 6.97% 6.25% 8.71% 2.20%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $37,529 $38,724 $45,157 $54,518(10) $54,507 $34,147
Ratio of Operating Expenses to Average Net Assets(3)...... 0.82%(5) 0.86% 0.82% 0.73% 0.42% 0.00%(5)
Ratio of Net Investment Income to Average Net Assets...... 4.39%(5) 4.49% 4.61% 4.62% 4.95% 4.25%(5)
Portfolio Turnover Rate................................... 7% 25% 29% 27% 13% 17%
Ratio of Operating Expenses to Average Net Assets Without
Credits Allowed by the Custodian......................... - 0.86%(10) 0.83%(10) 0.75%(10) N/A N/A
Ratio of Operating Expenses to Average Net Assets Without
Fee Waivers, Expenses Absorbed and/or Credits Allowed by
the Custodian............................................ 1.15%(5) 1.25%(10) 1.31%(10) 1.39%(10) 1.41% 1.95%(5)
</TABLE>
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND CLASS B SHARES
<TABLE>
<CAPTION>
FISCAL
PERIOD
ENDED YEAR ENDED JUNE 30,
OCTOBER 31, --------------------------------------
1998(1) 1998(6) 1997 1996 1995(7)
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 10.81 $ 10.74 $ 10.56 $ 10.45 $ 10.10
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investments Income.................................... 0.13 0.41 0.41(9) 0.41 0.43
Net Realized & Unrealized Gain on Investments............. 0.21 0.17 0.23 0.15 0.35
------- ------- ------- ------- -------
Total From Investment Operations........................ 0.34 0.58 0.64 0.56 0.78
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.13) (0.41) (0.41) (0.41) (0.43)
Distributions in Excess of Net Investment Income.......... - (0.00)(8) - - -
Distributions from Net Realized Gains..................... - (0.10) (0.05) (0.04) -
Distributions in Excess of Net Realized Gains............. - - - - -
Distributions from Capital................................ - - - - -
------- ------- ------- ------- -------
Total Distributions..................................... (0.13) (0.51) (0.46) (0.45) (0.43)
------- ------- ------- ------- -------
Net Asset Value, End of Period.............................. $ 11.02 $ 10.81 $ 10.74 $ 10.56 $ 10.45
======= ======= ======= ======= =======
Total Return(2)............................................. 3.20% 5.47% 6.17% 5.46% 7.90%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $23,960 $21,688 $20,992 $20,948 $12,391
Ratio of Operating Expenses to Average Net Assets(3)...... 1.57%(5) 1.61% 1.57% 1.48% 1.17%
Ratio of Net Investment Income to Average Net Assets...... 3.64%(5) 3.74% 3.86% 3.87% 4.20%
Portfolio Turnover Rate................................... 7% 25% 29% 27% 13%
Ratio of Operating Expenses to Average Net Assets Without
Credits Allowed by the Custodian......................... - 1.61%(10) 1.58%(10) 1.50%(10) N/A
Ratio of Operating Expenses to Average Net Assets Without
Fee Waivers, Expenses Absorbed and/or Credits Allowed by
the Custodian............................................ 1.90%(5) 2.01%(10) 2.06%(10) 2.14%(10) 2.16%
</TABLE>
Footnotes appear on page 85
74
<PAGE> 76
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FLORIDA INSURED MUNICIPAL FUND CLASS A SHARES
<TABLE>
<CAPTION>
FISCAL
PERIOD
ENDED YEAR ENDED JUNE 30,
OCTOBER 31, --------------------------------------------------
1998(1) 1998(6) 1997 1996 1995 1994
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 10.35 $ 9.93 $ 9.64 $ 9.43 $ 9.40 $ 10.05
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.17 0.49 0.49(9) 0.50 0.52 0.52
Net Realized & Unrealized Gain/(Loss) on Investments...... 0.15 0.42 0.30 0.21 0.03(12) (0.65)
------- ------- ------- ------- ------- -------
Total From Investment Operations........................ 0.32 0.91 0.79 0.71 0.55 (0.13)
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.17) (0.49) (0.50) (0.50) (0.52) (0.52)
Distributions in Excess of Net Investment Income.......... - - (0.00)(8) - - (0.00)(8)
Distributions from Net Realized Gains..................... - - - - - -
Distributions in Excess of Net Realized Gains............. - - - - - (0.00)(8)
Distributions from Capital................................ - - - - - -
------- ------- ------- ------- ------- -------
Total Distributions..................................... (0.17) (0.49) (0.50) (0.50) (0.52) (0.52)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period.............................. $ 10.50 $ 10.35 $ 9.93 $ 9.64 $ 9.43 $ 9.40
======= ======= ======= ======= ======= =======
Total Return(2)............................................. 3.08% 9.34% 8.43% 7.56% 6.01% (1.50%)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $15,813 $16,538 $22,761 $29,821 $33,714 $38,541
Ratio of Operating Expenses to Average Net Assets(3)...... 0.82%(5) 0.88% 0.82% 0.63% 0.39% 0.00%
Ratio of Net Investment Income to Average Net Assets...... 4.76%(5) 4.79% 5.01% 5.08% 5.53% 5.09%
Portfolio Turnover Rate................................... 40% 51% 53% 52% 44% 83%
Ratio of Operating Expenses to Average Net Assets Without
Credit Allowed by the Custodian.......................... - 0.89%(10) 0.84%(10) 0.66%(10) N/A N/A
Ratio of Operating Expenses to Average Net Assets Without
Fee Waivers, Expenses Absorbed and/or Credit Allowed by
the Custodian............................................ 1.40%(5) 1.45%(10) 1.46%(10) 1.46%(10) 1.51% 1.55%
</TABLE>
FLORIDA INSURED MUNICIPAL FUND CLASS B SHARES
<TABLE>
<CAPTION>
FISCAL
PERIOD
ENDED YEAR ENDED JUNE 30,
OCTOBER 31, ---------------------------------------
1998(1) 1998(6) 1997 1996 1995(7)
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $10.35 $ 9.93 $ 9.64 $ 9.43 $ 9.40
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.14 0.41 0.42(9) 0.42 0.45
Net Realized & Unrealized Gain on Investments............. 0.15 0.43 0.30 0.21 0.03(12)
------ ------ ------ ------ ------
Total From Investment Operations........................ 0.29 0.84 0.72 0.63 0.48
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.14) (0.42) (0.43) (0.42) (0.45)
Distributions in Excess of Net Investment Income.......... - - (0.00)(8) - -
Distributions from Net Realized Gains..................... - - - - -
Distributions in Excess of Net Realized Gains............. - - - - -
Distributions from Capital................................ - - - - -
------ ------ ------ ------ ------
Total Distributions..................................... (0.14) (0.42) (0.43) (0.42) (0.45)
------ ------ ------ ------ ------
Net Asset Value, End of Period.............................. $10.50 $10.35 $ 9.93 $ 9.64 $ 9.43
====== ====== ====== ====== ======
Total Return(2)............................................. 2.82% 8.53% 7.63% 6.76% 5.23%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $6,054 $5,075 $5,067 $5,428 $3,330
Ratio of Operating Expenses to Average Net Assets(3)...... 1.57%(5) 1.63% 1.57% 1.38% 1.14%
Ratio of Net Investment Income to Average Net Assets...... 4.01%(5) 4.04% 4.26% 4.33% 4.78%
Portfolio Turnover Rate................................... 40% 51% 53% 52% 44%
Ratio of Operating Expenses to Average Net Assets Without
Credit Allowed by the Custodian.......................... - 1.64%(10) 1.59%(10) 1.41%(10) N/A
Ratio of Operating Expenses to Average Net Assets Without
Fee Waivers, Expenses Absorbed and/or Credit Allowed by
the Custodian............................................ 2.15%(5) 2.21%(10) 2.21%(10) 2.21%(10) 2.26%
</TABLE>
Footnotes appear on page 85
75
<PAGE> 77
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
BOND & STOCK FUND CLASS A SHARES(22)
<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED YEAR ENDED OCTOBER 31,
OCTOBER 31, ---------------------------------------
1998 1997 1996 1995 1994
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 16.13 $ 14.71 $ 13.48 $ 11.53 $ 12.23
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.45(9) 0.50 0.52 0.50 0.46
Net Realized & Unrealized Gain/(Loss) on Investments...... 0.21(12) 2.37 1.53 2.02 (0.57)
-------- -------- -------- -------- --------
Total From Investment Operations........................ 0.66 2.87 2.05 2.52 (0.11)
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.45) (0.51) (0.50) (0.49) (0.44)
Distributions from Capital Gains.......................... (2.32) (0.94) (0.32) (0.08) (0.15)
-------- -------- -------- -------- --------
Total Distributions..................................... (2.77) (1.45) (0.82) (0.57) (0.59)
-------- -------- -------- -------- --------
Net Asset Value, End of Period.............................. $14.02 $ 16.13 $ 14.71 $ 13.48 $ 11.53
======== ======== ======== ======== ========
Total Return(2)............................................. 4.03% 20.81% 15.66% 22.55% (0.90)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $298,651 $307,018 $255,414 $208,592 $191,615
Ratio of Operating Expenses to Average Net Assets(3)...... 0.97% 0.99% 0.98% 1.02% 1.06%
Ratio of Net Investment Income to Average Net Assets...... 3.09% 3.31% 3.68% 3.98% 3.97%
Portfolio Turnover Rate................................... 80% 54% 46% 32% 25%
</TABLE>
BOND & STOCK FUND CLASS B SHARES(22)
<TABLE>
<CAPTION>
FISCAL MARCH 30,
PERIOD ENDED YEAR ENDED OCTOBER 31, 1994 TO
OCTOBER 31, ------------------------ OCTOBER 31,
1998 1997 1996 1995 1994(18)
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 16.10 $ 14.69 $ 13.47 $11.51 $11.49
------- ------- ------- ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.33(9) 0.39 0.41 0.39 0.18
Net Realized & Unrealized Gain on Investments............. 0.19(12) 2.36 1.53 2.03 0.04
------- ------- ------- ------ ------
Total From Investment Operations........................ 0.52 2.75 1.94 2.42 0.22
------- ------- ------- ------ ------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.34) (0.40) (0.40) (0.38) (0.20)
Distributions from Capital Gains.......................... (2.32) (0.94) (0.32) (0.08) -
------- ------- ------- ------ ------
Total Distributions..................................... (2.66) (1.34) (0.72) (0.46) (0.20)
------- ------- ------- ------ ------
Net Asset Value, End of Period.............................. $13.96 $ 16.10 $ 14.69 $13.47 $11.51
======= ======= ======= ====== ======
Total Return(2)............................................. 3.12% 19.86% 14.73% 21.60% 1.94%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $74,542 $46,556 $22,243 $7,372 $3,362
Ratio of Operating Expenses to Average Net Assets(3)...... 1.76% 1.79% 1.86% 1.84% 1.77%(5)
Ratio of Net Investment Income to Average Net Assets...... 2.30% 2.48% 2.80% 3.10% 3.22%(5)
Portfolio Turnover Rate................................... 80% 54% 46% 32% 25%
</TABLE>
Footnotes appear on page 85
76
<PAGE> 78
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
GROWTH & INCOME FUND CLASS A SHARES(23)
<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED YEAR ENDED OCTOBER 31,
OCTOBER 31, -----------------------------------------
1998 1997 1996 1995 1994
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 21.01 $ 17.26 $ 14.65 $ 12.71 $ 12.81
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income..................................... 0.11(9) 0.12 0.20 0.22 0.18
Net Realized & Unrealized Gain/(Loss) on Investments...... 1.43 4.98 3.16 2.31 0.85
-------- -------- -------- -------- --------
Total From Investment Operations........................ 1.54 5.10 3.36 2.53 1.03
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.09) (0.14) (0.21) (0.19) (0.18)
Distributions from Capital Gains.......................... (2.47) (1.21) (0.54) (0.40) (0.95)
-------- -------- -------- -------- --------
Total Distributions..................................... (2.56) (1.35) (0.75) (0.59) (1.13)
-------- -------- -------- -------- --------
Net Asset Value, End of Period.............................. $19.99 $ 21.01 $ 17.26 $ 14.65 $ 12.71
======== ======== ======== ======== ========
Total Return(2)............................................. 7.38% 31.24% 23.61% 20.87% 8.55%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $502,115 $299,928 $178,331 $130,630 $102,837
Ratio of Operating Expenses to Average Net Assets(3)...... 0.94% 1.05% 1.03% 1.07% 1.10%
Ratio of Net Investment Income to Average Net Assets...... 0.52% 0.66% 1.26% 1.62% 1.45%
Portfolio Turnover Rate................................... 79% 71% 52% 39% 34%
</TABLE>
GROWTH & INCOME FUND CLASS B SHARES(23)
<TABLE>
<CAPTION>
FISCAL MARCH 30,
PERIOD ENDED YEAR ENDED OCTOBER 31, 1994 TO
OCTOBER 31, ------------------------- OCTOBER 31,
1998 1997 1996 1995 1994(18)
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 20.85 $ 17.17 $ 14.59 $12.68 $12.00
-------- ------- ------- ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income/(Loss).............................. (0.07)(9) (0.02) 0.06 0.11 0.05
Net Realized & Unrealized Gain on Investments............. 1.46 4.93 3.14 2.31 0.69
-------- ------- ------- ------ ------
Total From Investment Operations........................ 1.39 4.91 3.20 2.42 0.74
-------- ------- ------- ------ ------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... (0.00)(8) (0.02) (0.08) (0.11) (0.06)
Distributions from Capital Gains.......................... (2.47) (1.21) (0.54) (0.40) -
-------- ------- ------- ------ ------
Total Distributions..................................... (2.47) (1.23) (0.62) (0.51) (0.06)
-------- ------- ------- ------ ------
Net Asset Value, End of Period.............................. $ 19.77 $ 20.85 $ 17.17 $14.59 $12.68
======== ======= ======= ====== ======
Total Return(2)............................................. 6.60% 30.20% 22.55% 19.95% 6.14%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $117,063 $49,994 $22,851 $8,871 $2,082
Ratio of Operating Expenses to Average Net Assets(3)...... 1.79% 1.88% 1.94% 1.91% 1.85%(5)
Ratio of Net Investment Income/(Loss) to Average Net
Assets................................................... (0.33)% (0.19)% 0.34% 0.69% 0.65%(5)
Portfolio Turnover Rate................................... 79% 71% 52% 39% 34%
</TABLE>
Footnotes appear on page 85
77
<PAGE> 79
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NORTHWEST FUND CLASS A SHARES(24)
<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED YEAR ENDED OCTOBER 31,
OCTOBER 31, -----------------------------------------
1998 1997 1996 1995 1994
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 25.92 $ 19.69 $ 17.40 $ 14.30 $ 14.50
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income/(Loss).............................. (0.02)(9) (0.02) 0.03 0.07 0.08
Net Realized & Unrealized Gain/(Loss) on Investments...... (0.76) 8.13 2.47 3.10 0.35
-------- -------- -------- -------- --------
Total From Investment Operations........................ (0.78) 8.11 2.50 3.17 0.43
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... - - (0.03) (0.07) (0.08)
Distributions from Capital Gains.......................... (4.74) (1.88) (0.18) - (0.55)
Distributions from Capital................................ (0.03) - - - -
-------- -------- -------- -------- --------
Total Distributions..................................... (4.77) (1.88) (0.21) (0.07) (0.63)
-------- -------- -------- -------- --------
Net Asset Value, End of Period.............................. $ 20.37 $ 25.92 $ 19.69 $ 17.40 $ 14.30
======== ======== ======== ======== ========
Total Return(2)............................................. (4.81)% 44.47% 14.54% 22.24% 2.97%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $243,126 $256,908 $176,706 $157,953 $152,622
Ratio of Operating Expenses to Average Net Assets(3)...... 1.10% 1.05% 1.08% 1.10% 1.09%
Ratio of Net Investment Income/(Loss) to Average Net
Assets................................................... (0.09)% (0.08)% 0.16% 0.44% 0.51%
Portfolio Turnover Rate................................... 39% 37% 42% 9% 11%
Ratio of operating expenses to average net assets w/o fee
waivers or fees reduced by credits allowed by the
custodian................................................ 1.10% 1.11% 1.08% 1.10% 1.09%
</TABLE>
NORTHWEST FUND CLASS B SHARES(24)
<TABLE>
<CAPTION>
FISCAL MARCH 30,
PERIOD ENDED YEAR ENDED OCTOBER 31, 1994 TO
OCTOBER 31, --------------------------- OCTOBER 31,
1998 1997 1996 1995 1994(18)
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 25.34 $ 19.45 $ 17.31 $ 14.28 $ 14.42
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Loss....................................... (0.20)(9) (0.08) (0.08) (0.05) (0.02)
Net Realized & Unrealized Gain/(Loss) on Investments...... (0.73) 7.85 2.40 3.08 (0.12)
------- -------- -------- -------- --------
Total From Investment Operations........................ (0.93) 7.77 2.32 3.03 (0.14)
------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... - - - - -
Distributions from Capital Gains.......................... (4.74) (1.88) (0.18) - -
Distributions from Capital................................ (0.03) - - - -
------- -------- -------- -------- --------
Total Distributions..................................... (4.77) (1.88) (0.18) - -
------- -------- -------- -------- --------
Net Asset Value, End of Period.............................. $19.64 $ 25.34 $ 19.45 $ 17.31 $ 14.28
======= ======== ======== ======== ========
Total Return(2)............................................. (5.63)% 43.17% 13.54% 21.25% (0.97)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $47,106 $ 39,627 $ 14,653 $ 7,083 $ 3,012
Ratio of Operating Expenses to Average Net Assets(3)...... 1.95% 1.91% 1.98% 1.95% 1.96%(5)
Ratio of Net Investment Loss to Average Net Assets........ (0.94)% (0.94)% (0.76)% (0.45)% (0.39)%(5)
Portfolio Turnover Rate................................... 39% 37% 42% 9% 11%
Ratio of operating expenses to average net assets w/o fee
waivers or fees reduced by credits allowed by the
custodian................................................ 1.95% 1.97% 1.98% 1.95% 1.96%(5)
</TABLE>
Footnotes appear on page 85
78
<PAGE> 80
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
GROWTH FUND CLASS A SHARES
<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED YEAR ENDED JUNE 30,
OCTOBER 31, ----------------------------------------------------------
1998(1) 1998(6) 1997 1996 1995 1994
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $ 18.46 $ 14.90 $ 15.69 $ 14.18 $ 10.73 $ 10.72
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income/(Loss).................... (0.07)(9) (0.15)(9) (0.03)(9) (0.07)(9) 0.05(9) (0.02)
Net Realized & Unrealized Gain/(Loss) on
Investments.................................... (0.75) 4.99 1.58 3.47 3.42 0.03(12)
-------- -------- -------- -------- -------- --------
Total From Investment Operations.............. (0.82) 4.84 1.55 3.40 3.47 0.01
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income............ - - - - (0.02) -
Distributions in Excess of Net Investment
Income......................................... - - - - - -
Distributions from Net Realized Gains........... - (1.28) (2.34) (1.89) (0.00)(8) -
Distributions in Excess of Net Realized Gains... - - - - - -
Distributions from Capital...................... - - - - - -
-------- -------- -------- -------- -------- --------
Total Distributions........................... - (1.28) (2.34) (1.89) (0.02) -
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period.................... $ 17.64 $ 18.46 $ 14.90 $ 15.69 $ 14.18 $ 10.73
======== ======== ======== ======== ======== ========
Total Return(2)................................... (4.44)% 35.43% 10.88% 25.44% 32.33% 0.00%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)............ $104,775 $112,153 $111,187 $179,720 $154,763 $126,808
Ratio of Operating Expenses to Average Net
Assets(3)...................................... 1.69%(5) 1.66% 1.70% 1.70% 1.76% 1.75%
Ratio of Net Investment Income to Average Net
Assets......................................... (1.21)%(5) (0.91)% (0.22)% (0.49)% 0.28% -0.35%
Portfolio Turnover Rate......................... 24% 153% 156% 205% 233% 227%
Ratio of Operating Expenses to Average Net
Assets Without Credits Allowed by the
Custodian...................................... - 1.66%(10) 1.70%(10) 1.71%(10) N/A N/A
Ratio of Operating Expenses to Average Net
Assets Without Fee Waivers, Expenses Absorbed
and/or Credits Allowed by the Custodian........ - 1.66%(10) 1.70%(10) 1.71%(10) 1.76% 1.75%
</TABLE>
GROWTH FUND CLASS B SHARES
<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED YEAR ENDED JUNE 30,
OCTOBER 31, -------------------------------------------
1998(1) 1998(6) 1997 1996 1995(7)
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 17.82 $ 14.53 $ 15.47 $ 14.10 $ 10.73
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Loss....................................... (0.12)(9) (0.25)(9) (0.14)(9) (0.19)(9) (0.04)(9)
Net Realized & Unrealized Gain on Investments............. (0.71) 4.82 1.54 3.45 3.42
------- ------- ------- ------- -------
Total From Investment Operations........................ (0.83) 4.57 1.40 3.26 3.38
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... - - - - (0.01)
Distributions in Excess of Net Investment Income.......... - - - - -
Distributions from Net Realized Gains..................... - (1.28) (2.34) (1.89) (0.00)(8)
Distributions in Excess of Net Realized Gains............. - - - - -
Distributions from Capital................................ - - - - -
------- ------- ------- ------- -------
Total Distributions..................................... - (1.28) (2.34) (1.89) (0.01)
------- ------- ------- ------- -------
Net Asset Value, End of Period.............................. $ 16.99 $ 17.82 $ 14.53 $ 15.47 $ 14.10
======= ======= ======= ======= =======
Total Return(2)............................................. (4.66)% 34.43% 9.99% 24.54% 31.46%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $39,379 $38,390 $30,397 $25,067 $ 6,928
Ratio of Operating Expenses to Average Net Assets(3)...... 2.54%(5) 2.46% 2.45% 2.45% 2.51%
Ratio of Net Investment Loss to Average Net Assets........ (2.06)%(5) (1.70)% (0.97)% (1.24)% (0.47)%
Portfolio Turnover Rate................................... 24% 153% 156% 205% 233%
Ratio of Operating Expenses to Average Net Assets Without
Credits Allowed by the Custodian......................... - 2.46%(10) 2.45%(10) 2.46%(10) N/A
Ratio of Operating Expenses to Average Net Assets Without
Fee Waivers, Expenses Absorbed and/or Credits Allowed by
the Custodian............................................ - 2.46%(10) 2.45%(10) 2.46%(10) 2.51%
</TABLE>
Footnotes appear on page 85
79
<PAGE> 81
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
EMERGING GROWTH FUND CLASS A SHARES
<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED
OCTOBER 31,
1998(1)
------------
<S> <C>
Net Asset Value, Beginning of Period.............. $19.49
--------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Loss............................. (0.08)(9)
Net Realized & Unrealized Gain/(Loss) on
Investments.................................... (3.16)
--------
Total From Investment Operations.............. (3.24)
--------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income............ -
Distributions in Excess of Net Investment
Income......................................... -
Distributions from Net Realized Gains........... -
Distributions in Excess of Net Realized Gains... -
Distributions from Capital...................... -
--------
Total Distributions........................... -
--------
Net Asset Value, End of Period.................... $16.25
========
Total Return(2)................................... (16.62)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)............ $88,502
Ratio of Operating Expenses to Average Net
Assets(3)...................................... 1.88%(5)
Ratio of Net Investment Loss to Average Net
Assets......................................... (1.43)%(5)
Portfolio Turnover Rate......................... 20%
Ratio of Operating Expenses to Average Net
Assets Without Fee Waivers, Expenses Absorbed
and/or Credits Allowed by the Custodian........ 1.89%(5)
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------------
1998(6) 1997 1996 1995 1994
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $18.28 $20.17 $15.47 $13.02 $13.76
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Loss............................. (0.22)(9) (0.21)(9) (0.19)(9) (0.00)(8)(9) (0.09)
Net Realized & Unrealized Gain/(Loss) on
Investments.................................... 2.50 (0.18) 5.65 2.77 0.68
-------- -------- -------- -------- --------
Total From Investment Operations.............. 2.28 (0.39) 5.46 2.77 0.59
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income............ - - - - -
Distributions in Excess of Net Investment
Income......................................... - - - - -
Distributions from Net Realized Gains........... (1.07) (1.50) (0.76) (0.32) (1.33)
Distributions in Excess of Net Realized Gains... - - - - -
Distributions from Capital...................... - - - - -
-------- -------- -------- -------- --------
Total Distributions........................... (1.07) (1.50) (0.76) (0.32) (1.33)
-------- -------- -------- -------- --------
Net Asset Value, End of Period.................... $19.49 $18.28 $20.17 $15.47 $13.02
======== ======== ======== ======== ========
Total Return(2)................................... 12.95% (1.50)% 35.93% 21.54% 3.40%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)............ $118,473 $165,719 $283,747 $185,722 $124,941
Ratio of Operating Expenses to Average Net
Assets(3)...................................... 1.66% 1.64% 1.64% 1.68% 1.66%
Ratio of Net Investment Loss to Average Net
Assets......................................... (1.10)% (1.17)% (1.02)% (0.31)% (0.68)%
Portfolio Turnover Rate......................... 112% 81% 131% 181% 224%
Ratio of Operating Expenses to Average Net
Assets Without Fee Waivers, Expenses Absorbed
and/or Credits Allowed by the Custodian........ 1.66%(10) 1.64%(10) 1.65%(10) N/A N/A
</TABLE>
EMERGING GROWTH FUND CLASS B SHARES
<TABLE>
<CAPTION>
FISCAL
PERIOD ENDED
OCTOBER 31,
1998(1)
-------------------
<S> <C>
Net Asset Value, Beginning of Period....... $18.86
---------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income/(Loss)............. (0.13)(9)
Net Realized & Unrealized Gain/(Loss) on
Investments............................. (3.06)
---------
Total From Investment Operations....... (3.19)
---------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income..... -
Distributions in Excess of Net Investment
Income.................................. -
Distributions from Net Realized Gains.... -
Distributions in Excess of Net Realized
Gains................................... -
Distributions from Capital............... -
---------
Total Distributions.................... -
---------
Net Asset Value, End of Period............. $15.67
=========
Total Return(2)............................ (16.87)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)..... $22,172
Ratio of Operating Expenses to Average
Net Assets(3)........................... 2.84%(5)
Ratio of Net Investment Income/Loss to
Average Net Assets...................... (2.39)%(5)
Portfolio Turnover Rate.................. 20%
Ratio of Operating Expenses to Average
Net Assets Without Fee Waivers,
Expenses Absorbed and/or Credits Allowed
by the Custodian........................ 2.85%(5)
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------------------------
1998(6) 1997 1996 1995(7)
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period....... $17.85 $19.88 $15.37 $13.02
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income/(Loss)............. (0.36)(9) (0.34)(9) (0.32)(9) (0.10)(9)
Net Realized & Unrealized Gain/(Loss) on
Investments............................. 2.44 (0.19) 5.59 2.77
------- ------- ------- -------
Total From Investment Operations....... 2.08 (0.53) 5.27 2.67
------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income..... - - - -
Distributions in Excess of Net Investment
Income.................................. - - - -
Distributions from Net Realized Gains.... (1.07) (1.50) (0.76) (0.32)
Distributions in Excess of Net Realized
Gains................................... - - - -
Distributions from Capital............... - - - -
------- ------- ------- -------
Total Distributions.................... (1.07) (1.50) (0.76) (0.32)
------- ------- ------- -------
Net Asset Value, End of Period............. $18.86 $17.85 $19.88 $15.37
======= ======= ======= =======
Total Return(2)............................ 12.05% (2.26)% 34.93% 20.69%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)..... $28,540 $29,123 $28,920 $10,208
Ratio of Operating Expenses to Average
Net Assets(3)........................... 2.47% 2.39% 2.39% 2.43%
Ratio of Net Investment Income/Loss to
Average Net Assets...................... (1.92)% (1.92)% (1.77)% (1.06)%
Portfolio Turnover Rate.................. 112% 81% 131% 181%
Ratio of Operating Expenses to Average
Net Assets Without Fee Waivers,
Expenses Absorbed and/or Credits Allowed
by the Custodian........................ 2.47%(10) 2.39%(10) 2.40%(10) N/A
</TABLE>
Footnotes appear on page 85
80
<PAGE> 82
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
INTERNATIONAL GROWTH FUND CLASS A SHARES
<TABLE>
<CAPTION>
FISCAL
PERIOD
ENDED
OCTOBER 31,
1998(1)
---------------
<S> <C>
Net Asset Value, Beginning of Period.................... $10.20
---------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income/(Loss).......................... (0.02)(9)
Net Realized & Unrealized Gain/(Loss) on
Investments.......................................... (1.32)
---------
Total From Investment Operations.................... (1.34)
---------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income.................. -
Distributions in Excess of Net Investment Income...... -
Distributions from Net Realized Gains................. -
Distributions in Excess of Net Realized Gains......... -
---------
Total Distributions................................. -
---------
Net Asset Value, End of Period.......................... $8.86
=========
Total Return(2)......................................... (13.14)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's).................. $30,117
Ratio of Operating Expenses to Average Net
Assets(3)............................................ 1.86%(5)
Ratio of Net Investment Income/(Loss) to Average Net
Assets............................................... (0.50)%(5)
Portfolio Turnover Rate............................... 41%
Ratio of Operating Expenses to Average Net Assets
Without Fee Waivers, Expenses Absorbed and/or Credits
Allowed by the Custodian............................. 1.86%(5)
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------
1998(6) 1997 1996 1995 1994
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.................... $11.85 $10.49 $9.78 $10.74 $9.80
------- -------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income/(Loss).......................... 0.05(9) 0.04(9) 0.05(9) (0.11)(9) 0.06
Net Realized & Unrealized Gain/(Loss) on
Investments.......................................... (0.67) 1.55 1.21 (0.31) 1.15
------- -------- ------- ------- -------
Total From Investment Operations.................... (0.62) 1.59 1.26 (0.42) 1.21
------- -------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income.................. (0.50) (0.13) (0.05) (0.04) (0.02)
Distributions in Excess of Net Investment Income...... (0.03) - (0.04) - -
Distributions from Net Realized Gains................. (0.50) (0.10) (0.46) (0.44) (0.25)
Distributions in Excess of Net Realized Gains......... - - - (0.06) -
------- -------- ------- ------- -------
Total Distributions................................. (1.03) (0.23) (0.55) (0.54) (0.27)
------- -------- ------- ------- -------
Net Asset Value, End of Period.......................... $10.20 $11.85 $10.49 $9.78 $10.74
======= ======== ======= ======= =======
Total Return(2)......................................... (4.19)% 15.50% 13.16% (4.01)% 12.39%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's).................. $38,281 $57,776 $116,254 $91,763 $127,764
Ratio of Operating Expenses to Average Net
Assets(3)............................................ 1.67% 1.65% 1.77% 1.69% 1.69%
Ratio of Net Investment Income/(Loss) to Average Net
Assets............................................... 0.50% 0.35% 0.46% 0.62% 0.54%
Portfolio Turnover Rate............................... 118% 67% 125% 81% 44%
Ratio of Operating Expenses to Average Net Assets
Without Fee Waivers, Expenses Absorbed and/or Credits
Allowed by the Custodian............................. 1.67%(10) 1.65%(10) 1.77%(10) N/A N/A
</TABLE>
INTERNATIONAL GROWTH FUND CLASS B SHARES
<TABLE>
<CAPTION>
FISCAL
PERIOD
ENDED YEAR ENDED JUNE 30,
OCTOBER 31, --------------------------------------------
1998(1) 1998(6) 1997 1996 1995(7)
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $10.07 $11.70 $10.39 $9.73 $10.74
--------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Loss....................................... (0.05)(9) (0.04)(9) (0.04)(9) (0.03)(9) (0.17)(9)
Net Realized & Unrealized Gain/(Loss) on Investments...... (1.30) (0.64) 1.53 1.21 (0.31)
--------- -------- -------- -------- --------
Total From Investment Operations........................ (1.35) (0.68) 1.49 1.18 (0.48)
--------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income...................... - (0.42) (0.08) (0.02) (0.03)
Distributions in Excess of Net Investment Income.......... - (0.03) - (0.04) -
Distributions from Net Realized Gains..................... - (0.50) (0.10) (0.46) (0.44)
Distributions in Excess of Net Realized Gains............. - - - - (0.06)
--------- -------- -------- -------- --------
Total Distributions..................................... - (0.95) (0.18) (0.52) (0.53)
--------- -------- -------- -------- --------
Net Asset Value, End of Period.............................. $8.72 $10.07 $11.70 $10.39 $9.73
========= ======== ======== ======== ========
Total Return(2)............................................. (13.41)% (4.95)% 14.66% 12.34% (4.61)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's)...................... $3,552 $4,294 $4,876 $4,447 $2,268
Ratio of Operating Expenses to Average Net Assets(3)...... 2.97%(5) 2.49% 2.40% 2.52% 2.44%
Ratio of Net Investment Loss to Average Net Assets........ (1.61)%(5) (0.35)% (0.40)% (0.29)% (0.13)%
Portfolio Turnover Rate................................... 41% 118% 67% 125% 81%
Ratio of Operating Expenses to Average Net Assets Without
Fee Waivers, Expenses Absorbed and/or Credits Allowed by
the Custodian............................................ - 2.53%(10) 2.40%(10) 2.52%(10) 2.44%
</TABLE>
Footnotes appear on page 85
81
<PAGE> 83
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
STRATEGIC GROWTH PORTFOLIO(25)
<TABLE>
<CAPTION>
CLASS A
---------------
FISCAL
PERIOD
ENDED
OCTOBER 31,
1998(1)
---------------
<S> <C>
Net Asset Value, Beginning of Period............ $12.66
-------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income/(Loss).................. (0.02)(9)
Net Realized & Unrealized Gain on
Investments.................................. (0.97)
-------
Total From Investment Operations............ (0.99)
-------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income.......... -
Distributions in Excess of Net Investment
Income....................................... -
Distributions from Net Realized Gains......... -
-------
Total Distributions......................... -
-------
Net Asset Value, End of Period.................. $11.67
=======
Total Return(2)................................. (7.82)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's).......... $19,690
Ratio of Operating Expenses to Average Net
Assets(3).................................... 0.95%(5)
Ratio of Net Investment Income/(Loss) to
Average Net Assets........................... (0.53)%(5)
Portfolio Turnover Rate....................... 10%
Ratio of Operating Expenses to Average Net
Assets Without Credits Allowed by the
Custodian(13)................................ -
Ratio of Operating Expenses to Average Net
Assets Without Fee Waivers, Expenses Absorbed
and/or Credits Allowed by the Custodian...... 1.13%(5)
<CAPTION>
CLASS A CLASS B
-------------------- -----------------------------------
FISCAL
YEAR JULY 25, PERIOD YEAR JULY 25,
ENDED 1996 TO ENDED ENDED 1996 TO
JUNE 30, JUNE 30, OCTOBER 31, JUNE 30, JUNE 30,
1998(6) 1997(4) 1998(1) 1998(6) 1997(4)
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period............ $11.26 $10.00 $12.53 $11.19 $10.00
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income/(Loss).................. 0.00(8)(9) (0.02)(9) (0.05)(4) (0.09)(9) (0.10)(9)
Net Realized & Unrealized Gain on
Investments.................................. 2.12 1.90 (0.96) 2.11 1.90
------- ------- ------- ------- -------
Total From Investment Operations............ 2.12 1.88 (1.01) 2.02 1.80
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from Net Investment Income.......... - - - - -
Distributions in Excess of Net Investment
Income....................................... (0.68) (0.62) - (0.64) (0.61)
Distributions from Net Realized Gains......... (0.04) (0.00)(8) - (0.04) (0.00)(8)
------- ------- ------- ------- -------
Total Distributions......................... (0.72) (0.62) - (0.68) (0.61)
------- ------- ------- ------- -------
Net Asset Value, End of Period.................. $12.66 $11.26 $11.52 $12.53 $11.19
======= ======= ======= ======= =======
Total Return(2)................................. 20.11% 19.33% (8.06)% 19.24% 18.48%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period ($1,000's).......... $18,330 $14,253 $51,752 $51,173 $35,802
Ratio of Operating Expenses to Average Net
Assets(3).................................... 0.94% 0.90%(5) 1.70%(5) 1.68% 1.65%(5)
Ratio of Net Investment Income/(Loss) to
Average Net Assets........................... 0.01% (0.19)%(5) (1.28)%(5) (0.74)% (0.94)%(5)
Portfolio Turnover Rate....................... 23% 33% 10% 23% 33%
Ratio of Operating Expenses to Average Net
Assets Without Credits Allowed by the
Custodian(13)................................ 0.94% 0.91%(5) - 1.68% 1.66%(5)
Ratio of Operating Expenses to Average Net
Assets Without Fee Waivers, Expenses Absorbed
and/or Credits Allowed by the Custodian...... 1.08% 1.45%(5) 1.88%(5) 1.83% 2.20%(5)
</TABLE>
CONSERVATIVE GROWTH PORTFOLIO(25)
<TABLE>
<CAPTION>
CLASS A CLASS B
-------------------------------------------- --------------------------------------------
FISCAL FISCAL
PERIOD ENDED YEAR ENDED JULY 25, 1996 TO PERIOD ENDED YEAR ENDED JULY 25, 1996 TO
OCTOBER 31, JUNE 30, JUNE 30, OCTOBER 31, JUNE 30, JUNE 30,
1998(1) 1998(6) 1997(4) 1998(1) 1998(6) 1997(4)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period.............................. $11.84 $10.86 $10.00 $11.74 $10.80 $10.00
-------- ------- ------ -------- ------- ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income/(Loss)...... 0.01 0.13(9) 0.08(9) (0.03) 0.04(9) 0.01(9)
Net Realized & Unrealized Gain on
Investments...................... (0.88) 1.42 1.32 (0.86) 1.43 1.31
-------- ------- ------ -------- ------- ------
Total From Investment
Operations...................... (0.87) 1.55 1.40 (0.89) 1.47 1.32
-------- ------- ------ -------- ------- ------
LESS DISTRIBUTIONS:
Dividends from Net Investment
Income........................... - (0.09) (0.08) - (0.08) (0.01)
Distributions in Excess of Net
Investment Income................ - (0.42) (0.46) - (0.39) (0.51)
Distributions from Net Realized
Gains............................ - (0.06) - - (0.06) -
-------- ------- ------ -------- ------- ------
Total Distributions............. - (0.57) (0.54) - (0.53) (0.52)
-------- ------- ------ -------- ------- ------
Net Asset Value, End of Period...... $10.97 $11.84 $10.86 $10.85 $11.74 $10.80
======== ======= ====== ======== ======= ======
Total Return(2)..................... (7.35)% 15.18% 14.39% (7.58)% 14.44% 13.59%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period
($1,000's)....................... $100,024 $114,946 $136,141 $155,064 $169,269 $158,697
Ratio of Operating Expenses to
Average Net Assets(13)(3)........ 0.95%(5) 0.95% 0.92%(5) 1.70%(5) 1.70% 1.67%(5)
Ratio of Net Investment
Income/(Loss) to Average Net
Assets........................... 0.05%(5) 1.17% 0.81%(5) (.70)%(5) 0.40% 0.06%(5)
Portfolio Turnover Rate........... 9% 28% 20% 9% 28% 20%
Ratio of Operating Expenses to
Average Net Assets Without
Credits Allowed by the
Custodian(13).................... - 0.95% 0.93%(5) - 1.70% 1.68%(5)
Ratio of Operating Expenses to
Average Net Assets Without Fee
Waivers, Expenses Absorbed and/or
Credits Allowed by the
Custodian........................ 1.03%(5) 1.00% 1.17%(5) 1.78%(5) 1.74% 1.92%(5)
</TABLE>
Footnotes appear on page 85
82
<PAGE> 84
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
BALANCED PORTFOLIO(25)
<TABLE>
<CAPTION>
CLASS A CLASS B
-------------------------------------------- --------------------------------------------
FISCAL FISCAL
PERIOD YEAR JULY 25, 1996 PERIOD YEAR JULY 25, 1996
ENDED ENDED TO ENDED ENDED TO
OCTOBER 31, JUNE 30, JUNE 30, OCTOBER 31, JUNE 30, JUNE 30,
1998(1) 1998(6) 1997(4) 1998(1) 1998(6) 1997(4)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period.............................. $11.63 $10.95 $10.00 $11.63 $10.95 $10.00
------- ------- ------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income............. 0.05 0.22 0.20(9) 0.02 0.17 0.14(9)
Net Realized & Unrealized
Gain/(Loss) on Investments....... (0.61) 1.25 1.27 (0.61) 1.22 1.25
------- ------- ------- -------- ------- -------
Total From Investment
Operations...................... (0.56) 1.47 1.47 (0.59) 1.39 1.39
------- ------- ------- -------- ------- -------
LESS DISTRIBUTIONS:
Dividends from Net Investment
Income........................... (0.05) (0.23) (0.20) (0.02) (0.20) (0.14)
Distributions in Excess of Net
Investment Income................ - (0.45) (0.32) - (0.40) (0.30)
Distributions from Net Realized
Gains............................ - (0.11) (0.00)(8) - (0.11) (0.00)(8)
------- ------- ------- -------- ------- -------
Total Distributions............. (0.05) (0.79) (0.52) (0.02) (0.71) (0.44)
------- ------- ------- -------- ------- -------
Net Asset Value, End of Period...... $11.02 $11.63 $10.95 $11.02 $11.63 $10.95
======= ======= ======= ======== ======= =======
Total Return(2)..................... (4.85)% 14.32% 15.02% (5.09)% 13.47% 14.23%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period
($1,000's)....................... $93,491 $101,726 $109,421 $110,626 $114,944 $99,821
Ratio of Operating Expenses to
Average Net Assets(13)(3)........ 0.95%(5) 0.95% 0.92%(5) 1.70%(5) 1.70% 1.67%(5)
Ratio of Net Investment
Income/Loss to Average Net
Assets........................... 1.22%(5) 2.14% 2.48%(5) 0.47%(5) 1.39% 1.73%(5)
Portfolio Turnover Rate........... 3% 29% 46% 3% 29% 46%
Ratio of Operating Expenses to
Average Net Assets Without
Credits Allowed by the
Custodian(13).................... - 0.95% 0.93%(5) - 1.70% 1.68%(5)
Ratio of Operating Expenses to
Average Net Assets Without Fee
Waivers, Expenses Absorbed and/or
Credits Allowed by the
Custodian........................ 1.02%(5) 1.00% 1.17%(5) 1.77%(5) 1.75% 1.92%(5)
</TABLE>
FLEXIBLE INCOME PORTFOLIO(25)
<TABLE>
<CAPTION>
CLASS A CLASS B
-------------------------------------------- --------------------------------------------
FISCAL FISCAL
PERIOD YEAR JULY 25, 1996 PERIOD YEAR JULY 25, 1996
ENDED ENDED TO ENDED ENDED TO
OCTOBER 31, JUNE 30, JUNE 30, OCTOBER 31, JUNE 30, JUNE 30,
1998(1) 1998(6) 1997(4)* 1998(1) 1998(6) 1997(4)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period.............................. $10.79 $10.57 $10.00 $10.79 $10.57 $10.00
------- ------ ------ ------- ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income............. 0.12 0.45 0.43(9) 0.10 0.31 0.38(9)
Net Realized & Unrealized
Gain/(Loss) on Investments....... (0.15) 0.67 0.70 (0.16) 0.73 0.68
------- ------ ------ ------- ------ ------
Total From Investment
Operations...................... (0.03) 1.12 1.13 (0.06) 1.04 1.06
------- ------ ------ ------- ------ ------
LESS DISTRIBUTIONS:
Dividends from Net Investment
Income........................... (0.13) (0.45) (0.43) (0.10) (0.37) (0.38)
Distributions in Excess of Net
Investment Income................ - (0.21) (0.13) - (0.21) (0.11)
Distributions from Net Realized
Gains............................ - (0.24) (0.00)(8) - (0.24) (0.00)(8)
------- ------ ------ ------- ------ ------
Total Distributions............. (0.13) (0.90) (0.56) (0.10) (0.82) (0.49)
------- ------ ------ ------- ------ ------
Net Asset Value, End of Period...... $10.63 $10.79 $10.57 $10.63 $10.79 $10.57
======= ====== ====== ======= ====== ======
Total Return(2)..................... (0.26)% 11.07% 11.58% (0.51)% 10.24% 10.80%
RATIOS/SUPPLEMENTAL DATA:
Net Assets End of Period
($1,000's)....................... $9,766 $8,808 $12,613 $11,142 $7,684 $7,385
Ratio of Operating Expenses to
Average Net Assets(13)(3)........ 0.95%(5) 0.95% 0.92%(5) 1.70%(5) 1.70% 1.67%(5)
Ratio of Net Investment Income to
Average Net Assets............... 3.62%(5) 4.07% 4.95%(5) 2.87%(5) 3.32% 4.20%(5)
Portfolio Turnover Rate........... 15% 24% 54% 15% 24% 54%
Ratio of Operating Expenses to
Average Net Assets Without
Credits Allowed by the
Custodian(13).................... - 0.95% 0.93%(5) - 1.70% 1.68%(5)
Ratio of Operating Expenses to
Average Net Assets Without Fee
Waivers, Expenses Absorbed and/or
Credits Allowed by the
Custodian........................ 1.37%(5) 1.23% 1.67%(5) 2.12%(5) 1.98% 2.42%(5)
</TABLE>
Footnotes appear on page 85
83
<PAGE> 85
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
INCOME PORTFOLIO(25)
<TABLE>
<CAPTION>
CLASS A CLASS B
-------------------------------------------- --------------------------------------------
FISCAL FISCAL
PERIOD ENDED YEAR ENDED JULY 25, 1996 TO PERIOD ENDED YEAR ENDED JULY 25, 1996 TO
OCTOBER 31, JUNE 30, JUNE 30, OCTOBER 31, JUNE 30, JUNE 30,
1998(1) 1998(6) 1997(4) 1998(1) 1998(6) 1997(4)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period.............................. $10.34 $10.13 $10.00 $10.34 $10.13 $10.00
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income............. 0.19 0.64 0.58(9) 0.16 0.56 0.51(9)
Net Realized & Unrealized
Gain/(Loss) on
Investments...................... (0.09) 0.22 0.14(12) (0.09) 0.22 0.14(12)
------ ------ ------ ------ ------ ------
Total From Investment
Operations...................... 0.10 0.86 0.72 0.07 0.78 0.65
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from Net Investment
Income........................... (0.19) (0.65) (0.58) (0.16) (0.57) (0.51)
Distributions in Excess of Net
Investment Income................ - (0.00)(8) (0.01) - (0.00)(8) (0.01)
Distributions from Net Realized
Gains............................ - - (0.00)(8) - - (0.00)(8)
------ ------ ------ ------ ------ ------
Total Distributions............. (0.19) (0.65) (0.59) (0.16) (0.57) (0.52)
------ ------ ------ ------ ------ ------
Net Asset Value, End of Period...... $10.25 $10.34 $10.13 $10.25 $10.34 $10.13
====== ====== ====== ====== ====== ======
Total Return(2)..................... (0.96)% 8.71% 7.38% 0.70% 7.90% 6.63%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period
($1,000's)....................... $7,611 $7,793 $13,410 $5,698 $4,084 $4,537
Ratio of Operating Expenses to
Average Net
Assets(13)(3).................... 0.95%(5) 0.95% 0.93%(5) 1.70%(5) 1.70% 1.68%(5)
Ratio of Net Investment
Income/Loss to Average Net
Assets........................... 5.40%(5) 6.23% 6.09%(5) 4.65%(5) 5.48% 5.34%(5)
Portfolio Turnover Rate........... 22% 14% 56% 22% 14% 56%
Ratio of Operating Expenses to
Average Net Assets Without
Credits Allowed by the
Custodian(13).................... - 0.95% 0.93%(5) - 1.71% 1.68%(5)
Ratio of Operating Expenses to
Average Net Assets Without Fee
Waivers, Expenses Absorbed and/or
Credits Allowed by the
Custodian........................ 1.53%(5) 1.25% 1.65%(5) 2.28%(5) 2.01% 2.40%(5)
</TABLE>
Footnotes appear on page 85
84
<PAGE> 86
- --------------------------------------------------------------------------------
FOOTNOTES TO FINANCIAL HIGHLIGHTS
<TABLE>
<C> <S>
(1) Fiscal year end changed to October 31.
(2) Total return is not annualized for periods less than one
year and does not reflect any applicable sales charges. The
total return would have been lower if certain fees had not
been waived and/or expenses absorbed by the investment
advisor or if fees had not been reduced by credits allowed
by the custodian.
(3) Ratio of operating expenses to average net assets includes
expenses paid indirectly beginning in fiscal 1995.
(4) From the commencement of offering shares.
(5) Annualized.
(6) On March 23, 1998, WM Advisors, Inc. replaced Sierra
Investment Advisers Corporation as investment advisor to the
Funds. In the case of the Portfolios, on March 23, 1998, WM
Advisors, Inc. replaced Sierra Investment Services
Corporation as investment advisor to the Portfolio.
(7) On July 1, 1994, the Funds commenced selling Class B shares
in addition to Class A shares. Those shares in existence
prior to July 1, 1994 were designated Class A shares.
(8) Amount represents less than $0.01 per share.
(9) Per share numbers have been calculated using the average
shares method.
(10) The ratio and per share numbers include custodian fees
before reduction by credits allowed by the custodian as
required by amended disclosure requirements effective
September 1, 1995.
(11) Total returns do not reflect a sales charge and are not
annualized.
(12) The amount shown may not accord with the change in aggregate
gains and losses of portfolio securities due to the timing
of sales and redemptions of Fund shares.
(13) The Portfolios will indirectly incur their pro rata share of
the expenses of the Funds when they purchase. Such
underlying Fund expenses are not included in the table.
(14) On May 2, 1994, the Fund commenced selling Class B shares.
Those shares in existence prior to May 2, 1994 were
designated as Class A shares.
(15) Formerly, Composite Cash Management Company Money Market
Portfolio.
(16) Formerly, Composite Cash Management Company Tax-Exempt
Portfolio.
(17) Formerly, Composite U.S. Government Securities, Inc.
(18) On March 30, 1994 the Fund commenced selling Class B shares.
Those shares in existence prior to March 30, 1994 were
designated as Class A shares.
(19) Formerly, Composite Income Fund, Inc.
(20) Amounts distributed in excess of accumulated net investment
income as determined for financial statement purposes have
been reported as distributions from paid-in capital at the
fiscal year end in which the distribution was made. Certain
of these distributions which are reported as being from
paid-in capital for financial statement purposes may be
reported to shareholders as taxable distributions due to
differing tax and accounting rules.
(21) Formerly, Composite Tax-Exempt Bond Fund, Inc.
(22) Formerly, Composite Bond & Stock Fund, Inc.
(23) Formerly, Composite Growth & Income Fund.
(24) Formerly, Composite Northwest Fund, Inc.
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APPENDIX A
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC. BOND RATINGS:
+ Aaa, Aa, A -- Bonds which are rated Aaa or Aa are judged to be of high quality
by all standards and are generally known as high grade bonds. Bonds rated Aa
are rated lower than Aaa securities because margins of protection may not be
as large as in the latter or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities. Bonds which are
rated A possess many favorable investment attributes and are to be considered
as upper medium grade obligations. Factors giving security to principal and
interest are considered adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future.
+ Baa -- Bonds which are rated Baa are considered medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
+ Ba -- Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well secured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
+ B -- Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
+ Caa -- Bonds which are rated Caa are poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
+ Ca -- Bonds which are rated Ca represent obligations which are speculative in
high degree. Such issues are often in default or have other marked
shortcomings.
+ C -- Bonds which are rated C are the lowest rated class of bonds and can be
regarded as having extremely poor prospectus of ever attaining any real
investment standing.
+ Description of Standard & Poor's bond ratings: AAA, AA, A -- Bonds rated AAA
have the highest rating assigned by S&P to a debt obligation. Capacity to pay
interest and repay principal is extremely strong. Bonds rated AA have a very
strong capacity to pay interest and repay principal and differ from the
highest rated issues only in small degree. Bonds rated A have a strong
capacity to pay interest and repay principal although they are somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions than bonds in high rated categories.
+ BBB -- Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to repay principal and pay
interest for bonds in this category than for bonds in higher rated categories.
+ BB-B-CCC-CC-C -- Bonds rated BB, B, CCC, CC and C are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the obligation.
BB indicates the lowest degree of speculation and C the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
+ CI -- The rating CI is reserved for income bonds on which no income is being
paid.
+ D -- Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.
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FOR MORE INFORMATION ABOUT THE WM GROUP OF FUNDS
The WM Group's Statement of Additional Information (SAI) and Annual and
Semi-annual Reports to shareholders include additional information about the
Funds and Portfolios. The SAI and the Reports of Independent Accountants, along
with the financial statements, included in the Funds' and Portfolios' two most
recent Annual Reports are incorporated by reference into this prospectus, which
means that they are part of this prospectus for legal purposes. The Funds' and
Portfolio's Annual Reports discuss the market conditions and investment
strategies that significantly affected performance during the last fiscal year.
You may obtain free copies of these materials, request other information about
the WM Group of Funds, or make shareholder inquiries, by contacting your
financial advisor or by calling toll-free 1-800-222-5852.
You may review and copy information about the Funds and Portfolios, including
the SAI, at the Securities and Exchange Commission's public reference room in
Washington, D.C. You may call the Commission at 1-800-SEC-0330 for information
about the operation of the public reference room. You may also access reports
and other information about the Funds and Portfolios on the Commission's
Internet site at http://www.sec.gov. You may obtain copies of this information,
with payment of a duplication fee, by writing the Public Reference Section of
the Commission, Washington, D.C. 20549-6009. You may need to refer to the
following file number:
FILE NO. 333-36941
Money Market Fund
Tax-Exempt Money Market Fund
U.S. Government Securities Fund
Income Fund
High Yield Fund
Tax-Exempt Bond Fund
Bond & Stock Fund
Growth & Income Fund
Northwest Fund
FILE NO. 33-27489
California Money Fund
Short Term High Quality Bond Fund
Target Maturity 2002 Fund
California Municipal Fund
California Insured Intermediate Municipal Fund
Florida Insured Municipal Fund
Growth Fund
Emerging Growth Fund
International Growth Fund
FILE NO. 333-01999
Strategic Growth Portfolio
Conservative Growth Portfolio
Balanced Portfolio
Flexible Income Portfolio
Income Portfolio
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(800) 222-5852
[LOGO]WM P.O. Box 9757
GROUP of FUNDS Providence, RI 02940-9757
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1. YOUR ACCOUNT REGISTRATION Check one box for the account you wish to open and complete information.
[ ] INDIVIDUAL ..................... NAME: ________________________________________ SS/TAX ID# ___________________
STREET ADDRESS ______________________________________________________________
CITY _______________________________________________STATE ______ ZIP ________
HOME PHONE ( )________________________ BUSINESS PHONE ( ) _________________
[ ] JOINT TENANT ................... NAME OF ADD'L OWNER:___________________________ SS/TAX ID# __________________
[ ] TENANTS IN COMMON
[ ] TRANSFER TO MINORS ............. ______________________________ AS CUSTODIAN FOR _____________________________
NAME OF CUSTODIAN NAME OF MINOR
UNDER THE _____ UNIFORM TRANSFERS (GIFTS) TO MINORS ACT ___ MINOR'S SS# _____
STATE AGE
[ ] OTHER .......................... NAME:___________________________________________ SS/TAX ID# _________________
Indicate name of Corporation, other organization or fiduciary; if Trust,
include date of instrument (additional forms, such as a Corporate Resolution
may be required -- call 800-222-5852 for information)
[ ] I AM A UNITED STATES CITIZEN ... IF NOT, PLEASE SPECIFY COUNTRY ______________________________________________
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2. YOUR INVESTMENT SELECTION Minimum initial $1,000; Minimum subsequent $50 per fund listed below
WM GROUP OF FUNDS
MONEY FUNDS EQUITY FUNDS
MONEY MARKET FUND Class A Shares $_______ BOND & STOCK FUND
Class B Shares $_______ Class A Shares $_______ Class B Shares $_______
TAX-EXEMPT MONEY MARKET FUND Class A Shares $_______ GROWTH & INCOME FUND
Class B Shares $_______ Class A Shares $_______ Class B Shares $_______
CALIFORNIA MONEY FUND Class A Shares $_______ GROWTH FUND
Class B Shares $_______ Class A Shares $_______ Class B Shares $_______
INTERNATIONAL GROWTH FUND
FIXED-INCOME FUNDS Class A Shares $_______ Class B Shares $_______
SHORT TERM HIGH QUALITY BOND FUND NORTHWEST FUND
Class A Shares $_______ Class B Shares $_______ Class A Shares $_______ Class B Shares $_______
TARGET MATURITY 2002 FUND EMERGING GROWTH FUND
Class A Shares $_______ Class A Shares $_______ Class B Shares $_______
U.S. GOVERNMENT SECURITIES FUND
Class A Shares $_______ Class B Shares $_______ STRATEGIC ASSET MANAGEMENT PORTFOLIOS
INCOME FUND ($10,000 MINIMUM; $100 SUBSEQUENT)
Class A Shares $_______ Class B Shares $_______ STRATEGIC GROWTH PORTFOLIO
HIGH YIELD FUND Class A Shares $_______ Class B Shares $_______
Class A Shares $_______ Class B Shares $_______ CONSERVATIVE GROWTH PORTFOLIO
Class A Shares $_______ Class B Shares $_______
MUNICIPAL FUNDS BALANCED PORTFOLIO
TAX-EXEMPT BOND FUND Class A Shares $_______ Class B Shares $_______
Class A Shares $_______ Class B Shares $_______ FLEXIBLE INCOME PORTFOLIO
CALIFORNIA MUNICIPAL FUND Class A Shares $_______ Class B Shares $_______
Class A Shares $_______ Class B Shares $_______ INCOME PORTFOLIO
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND Class A Shares $_______ Class B Shares $_______
Class A Shares $_______ Class B Shares $_______
FLORIDA INSURED MUNICIPAL FUND TOTAL INVESTMENT $______________________________________
Class A Shares $_______ Class B Shares $_______
OTHER ________________________ Amount $_______________
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3. YOUR PAYMENT METHOD FOR INITIAL INVESTMENT
[ ] CHECK .......................... MAKE CHECK PAYABLE TO: WM GROUP OF FUNDS
[ ] WIRE ........................... CALL 800-222-5852 FOR INSTRUCTIONS
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4. YOUR BROKER/DEALER -- (If you do not have a registered representative, we will refer you to one)
DEALER NAME/NUMBER _____________________________ BRANCH NUMBER _____________ REPRESENTATIVE'S NUMBER ______________
REPRESENTATIVES NAME: FIRST __________________________________ LAST _______________________________________________
BRANCH ADDRESS ____________________________________________________________________________________________________
CITY _____________________________________ STATE ________ ZIP ____________ TELEPHONE NO. __________________________
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5. SPECIAL FEATURES AND PRIVILEGES
A. TELEPHONE PRIVILEGES -- permits transfer of money by wire between your fund(s) within the WM GROUP OF FUNDS and
your designated bank account (please attach a voided unsigned check or deposit slip)
[ ] YES [ ] NO .... IF "YES," PLEASE WIRE MONIES TO THE FOLLOWING BANK:
NAME OF YOUR BANK _________________________________________________________________________________________________
BANK ACCOUNT NAME ____________________________________________ BANK ACCOUNT NO. ___________________________________
BANK ADDRESS _________________________________________________ CITY ______________________ STATE _____ ZIP ________
B. DIVIDEND AND DISTRIBUTION PLANS -- check only one; if none is checked, all dividends/distributions will be reinvested
[ ] FULL REINVESTMENT -- reinvest all dividends and distributions at net asset value
[ ] CASH -- [ ] pay all income dividends and distributions by check and mail/deposit to my bank provided in Section "A"
[ ] pay all income dividends and distributions by check and mail to the address provided in Section "1"
[ ] SYSTEMATIC WITHDRAWAL PLAN -- if you have more than $5,000 in a WM GROUP OF FUNDS mutual fund account, (per
Fund or Portfolio), you can elect to receive a regular check as follows:
FREQUENCY: [ ] - Monthly [ ] - Quarterly [ ] - Semi-Annually [ ] - Annually Amount $ _________________
DATE PAYMENT TO BEGIN ON ____________________
CHECK THE DATE OF PAYMENT YOU PREFER: [ ] - 10th day OR [ ] - 20th day of month
SEND PROCEEDS TO: [ ] - Bank on file [ ] - Client
C. CHECKWRITING PRIVILEGES -- available for Class A Shares of the money funds only; minimum of $250 per check
If you wish to redeem monies by check, complete the Signature Card (see following page).
D. AUTOMATIC INVESTMENT PLAN -- (optional)
I authorize the Trust's Agent to withdraw funds from the bank account provided below in the amount of $____________
(minimum $25), on the Days/Date indicated below and on the Day/Date of each week/month thereafter.
FREQUENCY: [ ] - Weekly _______________ [ ] - Bi-Monthly ________ & ________ [ ] - Monthly _______________
(Check one) Day of the week Date Date Date
NAME OF YOUR BANK ____________________________________________(account must have check or draft writing privileges)
BANK ACCOUNT NAME __________________________________________ BANK ACCOUNT/ABA NO. _________________________________
BANK ADDRESS _________________________________________________ CITY ______________________ STATE _____ ZIP ________
(please attach a voided unsigned check of encoded deposit slip)
E. SYSTEMATIC EXCHANGE -- specific dollar amount to be exchanged from one fund to another.
__________________________________________ Shares: [ ] A [ ] B (check one) _______________________________
From Fund To Fund
$_________________________________________ ___________________________________________________
Amount Beginning in month/year
Note: Can only exchange within the same class of shares.
APPLICATION CONTINUED ON THE NEXT PAGE
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F. LETTER OF INTENT -- (LOI)
I agree to the terms of the Letter of Intent and provisions for redemption of shares as set forth in the
Prospectus. Although I am not obligated to do so, it is my intention to invest over a 13-month period in Class A
Shares or one or more funds (excluding all Monday Funds) an aggregate amount at least equal to the amount indicated
below:
[ ] - $50,000 [ ] - $100,000 [ ] - $250,000 [ ] - $500,000 [ ] - $1,000,000
___________________ NOTE: THE EFFECTIVE DATE CAN BE NO MORE THAN 90 DAYS PRIOR TO TODAY'S DATE.
Effective Date
___________________________________________________________________ __________________________________
Signature(s) Date
G. RIGHT OF ACCUMULATION -- (ROA)
In order for a cumulative quantity discount (as described in the Prospectus) to be made available, you or your
securities dealer must notify WM Shareholder Services at 800-222-5852 of the total holdings in your group (excluding all
Class A Shares of Money Funds) each time an order is placed.
[ ] I own shares in other of the WM GROUP OF FUNDS which may entitle this purchase to have a reduced sales charge under the
provisions in the WM GROUP OF FUNDS Prospectus. My other account numbers (including accounts held by my spouse and minor
children) are:
______________________________________________________ ________________________________________________________
______________________________________________________ ________________________________________________________
_______________________________________________________________________________________ _______________________
Signature(s) Date
CLIENT'S SIGNATURE IS REQUIRED ON THE NEXT PAGE
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SIGNATURE CARD ACCOUNT NUMBER ___________________________________________________________________________
Please check the Fund(s) for which you wish to have Checkwriting Privileges:
[WM
GROUP OF FUNDS [ ] Money Market Fund [ ] California Money Fund [ ] Tax-Exempt Money Fund
LOGO]
PLEASE PRINT
BOSTON SAFE DEPOSIT Last Name ______________________ First Name _________________ Middle Init. ___________
AND TRUST CO.
Signature X ___________________________________________________________________________
All Registered Owners must
sign this Signature Card. Last Name ______________________ First Name _________________ Middle Init. ___________
Signature X ___________________________________________________________________________
[ ] Only one signature is required on checks. [ ] Both signatures are required on checks.
IF NEITHER BOX IS CHECKED, ALL CHECKS WILL REQUIRE BOTH SIGNATURES.
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6. CLIENT SIGNATURES AND TAXPAYER CERTIFICATION Please read and sign below
I am of legal age, have received and read the Prospectus, agree to its terms and understand that by signing below (a)
neither the Funds nor the Trusts of which they are a series are a bank; and Fund shares are not backed or guaranteed by
any bank nor insured by the FDIC; (b) my/our account will automatically have the Exchange Privilege capability and that
all information provided above (if applicable) will apply to any Fund into which my/our shares may be exchanged; (c) I
hereby ratify any instructions given on this account and any account into which I exchange relating to items on the
application and agree that neither the Funds, nor WM Shareholder Services, Inc., will be liable for any loss, cost or
expense for acting upon such instructions (by telephone or in writing) believed by it to be genuine and in accordance
with the procedures described in the Prospectus; (d) it is my responsibility to read the Prospectus; (e) I represent and
warrant that I have full right, power and authority to give the foregoing affirmations, certifications and
authorizations, and to make the investments applied for pursuant to the Application Form and, if signing on behalf of
the beneficial owner, represent and warrant that I am duly authorized to sign the Application Form and to purchase and
redeem shares (or to deposit and withdraw funds) on behalf of the beneficial owner.
TAXPAYER IDENTIFICATION NUMBER CERTIFICATION:
As required by federal Law, I/we certify under penalties of perjury (1) that the Social Security Number ("SSN") or
Taxpayer Identification Number ("TIN") provided above is correct and (2) that the IRS has never notified me/us that I/we
am/are subject to 31% backup withholding, or has notified me/us that I/we am/are no longer subject to such backup
withholding. (Note: If any or all of Part (2) of the preceding sentence is not true in your case, please strike out that
part before signing.) If I/we fail to furnish my/our correct SSN or TIN, I/we may be subject to a penalty for each
failure and my/our account may be subject to 31% backup withholding on distribution and redemption proceeds. THE
INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THE DOCUMENT OTHER THAN THE CERTIFICATION
REQUIRED TO AVOID BACKUP WITHHOLDING.
______________________________________________________ X ___________________________________________________________
Registered Representative's Name and Number Signature
______________________________________________________ X ___________________________________________________________
Date Signature
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The payment of redemption proceeds is Boston Safe is further authorized to
authorized by the signature(s) effect withdrawals or redemptions to
appearing on the reverse side. Each defray Boston Safe's charges relating
signatory guarantees the genuineness to this checking arrangement. The
of the other signatures. shareholder agrees that he/she shall
be subject to the rules and
Boston Safe Deposit and Trust Co. regulations of Boston Safe pertaining
("Boston Safe") is hereby appointed to this checking arrangement as
agent by the person(s) signing this amended from time to time; that Boston
card (the "Shareholder(s)") and, as Safe has the right not to honor checks
agent is authorized and directed, upon which do not meet Boston Safe's normal
presentment of checks to Boston Safe standards for checks presented to it,
to, in the case of investments in the that Boston Safe and WM Group of Funds
Money Market, Tax-Exempt Money Market have the right to change, modify or
and California Money (the "Funds"), terminate this checkwriting service at
transmit such checks to the Fund or any time, and that Boston Safe, with
its transfer agent as requests to respect to these checkwriting services
redeem shares registered in the name shall be liable to the Shareholder
of the Shareholders in the amounts of and/or the Funds only for its own
such checks for deposit in this willful misfeasance, bad faith or
checking account; WM Shareholder gross negligence.
Services, Inc., is hereby further
authorized to accept and execute Please sign and return this card (with
instructions relating to such any necessary authorizing
withdrawals. documentation) to:
This checking arrangement is subject WM GROUP OF FUNDS
to the applicable terms and P.O. Box 9757
restrictions, including charges, set Providence, RI 02940-9757
forth in the current prospectus for
each WM Group of Funds mutual fund to
which the Shareholder has arranged to
redeem shares by checkwriting.
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